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Weekly Market Snapshot

April 17, 2014

Market Commentary
by Scott J. Brown, Ph.D., Chief Economist

Stock market participants seemed only mildly concerned about escalating tensions in Ukraine, but were encouraged by comments from Fed Chair Janet Yellen. Yellen suggest that the Fed would respond to significant, surprising changes in the outlook for growth, inflation expectations, or financial conditions. Short-term interest rates aren’t going to be raised for a while, but the first increase in rates could be pushed out if the Fed remains short of its goals (full employment, 2% inflation).

The economic data were mixed, but suggested some recovery from adverse weather. Retail sales were stronger than expected in March, but core sales for the quarter were unchanged from 4Q13. Industrial production rose more than expected, but that partly reflecting a continuation of below normal temperatures. Indeed, while industrial production rose at a 4.4% annual rate in 1Q14, most of that was in mining (a 9.5% annual rate) and utilities (a 17.9% pace). Manufacturing output rose at a 1.7% annual rate in 1Q14, but is poised for a sharper rise in 2Q14. The Consumer Price Index rose a little more than expected in March, reflecting a 0.3% increase in shelter costs. Residential construction figures were mixed, but a bit disappointing.

Next week, financial market participants could react to any surprises in a number of data releases, but none of the reports will alter the overall economic picture. In contrast, April figures will begin arriving in the following week. The ISM Manufacturing Index and the Employment Report will help set near-term expectations for the economy.


Indices

  Last Last Week YTD return %
DJIA 16424.85 16170.22 -0.92%
NASDAQ 4086.23 4054.11 -2.16%
S&P 500 1862.31 1833.08 0.75%
MSCI EAFE 1904.98 1919.80 -0.55%
Russell 2000 1131.77 1127.66 -2.74%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.08 0.10
30-year mortgage 4.38 3.41

Currencies

  Last 1-year ago
Dollars per British Pound 1.679 1.531
Dollars per Euro 1.384 1.310
Japanese Yen per Dollar 102.260 97.830
Canadian Dollars per Dollar 1.100 1.023
Mexican Peso per Dollar 13.059 12.210

Commodities

  Last 1-year ago
Crude Oil 103.76 88.72
Gold 1303.97 1383.19

Bond Rates

  Last 1-month ago
2-year treasury 0.39 0.44
10-year treasury 2.67 2.78
10-year municipal (TEY) 4.31 4.38

Treasury Yield Curve – 4/17/2014


S&P Sector Performance (YTD) – 4/17/2014



Economic Calendar

April 21  —  Leading Economic Indicators (March)
April 22  —  Existing Home Sales (March)
April 23  —  New Home Sales (March)
April 24  —  Jobless Claims (week ending April 19)
Durable Goods Orders (March)
April 29  —  Consumer Confidence (April)
April 30  —  Real GDP (1Q14, advance estimate)
FOMC Policy Decision (no press conference)
May 1  —  ISM Manufacturing Index (April)

Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Also municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Investing involves risk and investors may incur a profit or a loss.

US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.

Tax Equiv Muni yields (TEY) assumes a 35% tax rate. Municipal securities may lose their tax-exempt status if certain legal requirements are not met, or if tax laws change.

Material prepared by Raymond James for use by its financial advisors.

Data source: Bloomberg, as of close of business April 16, 2014.

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