TBT Financial ServicesAn Independent Firm

Weekly Market Snapshot

October 24, 2014

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

Mixed, but generally favorable, earnings reports and an ebbing in Ebola fears helped propel the major stock market indices higher. The economic data were largely irrelevant. The Consumer Price Index continued to show a low trend in inflation (+1.7% y/y for both the headline index and the core). Home sales figures were mixed. The Index of Leading Economic Indicators rose 0.8% suggesting little chance of a recession anytime soon

Next week, the earnings calendar is brisk with about a third of the companies in the S&P 500 reporting. There are two key items on the economic calendar: the Fed policy meeting and the advance estimate of 3Q14 GDP growth.

The Federal Open Market Committee is widely expected to bring its asset purchase program (QE3) to a close. Being well advertised, this should not create any problems for the financial markets. For investors the key will be the language of the forward guidance – in particular, whether the Fed will remove the “considerable period” phrase. Such a change is coming, but it's more likely that this will happen at the next policy meeting (mid-December).

The advance GDP estimate is always an adventure. The government will have to make assumptions about a number of missing components and the figures will be revised in late November and revised again in December. The story behind the figures is what's important (although the financial markets tend to put a lot of weight on the headline number). Consumer spending appears to have been on a lackluster-to-moderate pace in 3Q14. Business fixed investment is expected to have been strong. A slower pace of inventory growth should subtract, while a narrower trade deficit should add.


Indices

  Last Last Week YTD return %
DJIA 16677.90 16117.24 0.61%
NASDAQ 4452.79 4217.39 6.61%
S&P 500 1950.82 1862.76 5.54%
MSCI EAFE 1776.57 1714.64 -7.26%
Russell 2000 1116.49 1085.85 -4.05%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.25 3.25
Fed Funds 0.08 0.09
30-year mortgage 3.92 4.13

Currencies

  Last 1 year ago
Dollars per British Pound 1.601 1.613
Dollars per Euro 1.267 1.374
Japanese Yen per Dollar 107.460 97.320
Canadian Dollars per Dollar 1.125 1.032
Mexican Peso per Dollar 13.532 12.948

Commodities

  Last 1 year ago
Crude Oil 82.34 96.36
Gold 1239.26 1330.14

Bond Rates

  Last 1 month ago
2-year treasury 0.39 0.58
10-year treasury 2.26 2.52
10-year municipal (TEY) 3.18 3.51

Treasury Yield Curve – 10/24/2014


S&P Sector Performance (YTD) – 10/24/2014



Economic Calendar

October 27  —  Pending Home Sales Index (September)
October 28  —  Durable Goods Orders (September)
Consumer Confidence (October)
October 29  —  FOMC Policy Decision (no press conference)
October 30  —  Jobless Claims (week ending October 25)
Real GDP (3Q14, advance estimate)
October 31  —  Employment Cost Index (3Q14)
Personal Income and Spending (September)
November 3  —  IISM Manufacturing Index (October)
Motor Vehicle Sales (October)
November 4  —  Election Day
November 6  —  ECB Policy Meeting
November 7  —  Employment Report (October)
November 11  —  Veterans Day (bond market closed)
November 14  —  Retail Sales (October)

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 October 23, 2014.

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