TBT Financial ServicesAn Independent Firm

Weekly Market Snapshot

October 17, 2014

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

What a week. Concerns about the downside risks to Europe and the rest of the world pushed global equity markets down and the U.S. followed. The economic data mattered little for the most part, but disappointing retail sales figures added to the drop in U.S. stocks on Wednesday. Yields on long-term Treasuries sank sharply. Following a few days of elevated volatility, the financial markets appeared to settle down on Friday. In recent weeks, the financial markets have reacted seemingly less to the somewhat softer expectations of global growth and more to the downside risks to that outlook. Inflated fears about the Ebola virus added to investor anxiety.

The economic data were mixed, but consistent with moderately strong growth in the near term. Retail sales figures for September disappointed, but a drop in gasoline prices could help the consumer spending outlook into early 2015. Industrial production rose 1.0%, but half of that gain was due to a rise in the output of utilities (reflecting a return to more normal temperatures following an unusually cool summer). Residential construction figures were mostly higher, but were not statistically significant (and single-family permits, the key figure in the report, edged lower).

Next week, the economic data reports will not be critical to the overall outlook, but a large enough surprise in any of the numbers could generate some reaction in the financial markets. The Consumer Price Index should continue to trend at a low level. The LEI should suggest little chance of a recession. New home sales are volatile, but affordability issues and tight credit have been constraints. The following week, with the Fed policy meeting and the advance GDP estimate, should be a lot more important.


Indices

  Last Last Week YTD return %
DJIA 16117.24 16659.25 -2.77%
NASDAQ 4217.39 4378.34 0.98%
S&P 500 1862.76 1928.21 0.78%
MSCI EAFE 1714.64 1786.21 -10.49%
Russell 2000 1085.85 1067.99 -6.69%

Consumer Money Rates

  Last 1-year ago
Prime Rate 3.25 3.25
Fed Funds 0.08 0.10
30-year mortgage 3.97 4.28

Currencies

  Last 1-year ago
Dollars per British Pound 1.599 1.603
Dollars per Euro 1.274 1.354
Japanese Yen per Dollar 105.680 98.330
Canadian Dollars per Dollar 1.134/td> 1.037
Mexican Peso per Dollar 13.637 12.958

Commodities

  Last 1-year ago
Crude Oil 82.70 102.29
Gold 1241.92 1283.29

Bond Rates

  Last 1-month ago
2-year treasury 0.37 0.57
10-year treasury 2.21 2.60
10-year municipal (TEY) 2.88 3.52

Treasury Yield Curve – 10/17/2014


S&P Sector Performance (YTD) – 10/17/2014



Economic Calendar

October 21  —  Existing Home Sales (September)
October 22  —  Consumer Price Index (September)
October 23  —  Jobless Claims (week ending October 18)
Leading Economic Indicators (September)
October 24  —  New Home Sales (September)
October 28  —  Durable Goods Orders (September)
Consumer Confidence (October)
October 29  —  FOMC Policy Decision (no press conference)
October 30  —  Real GDP (3Q14, advance estimate)
November 3  —  ISM Manufacturing Index (October)
November 4  —  Election Day
November 7  —  Employment Report (October)
December 17  —  FOMC Policy Decision (Yellen Press Conference)

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 16, 2014.

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