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Weekly Market Snapshot

August 28, 2015

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

A sharp drop in China’s stock market rattled investors’ nerves around the world. The Dow Jones Industrial Average fell by more than 1,000 points at the open on Monday, regrouped, and then fell again, leaving the benchmark index down 588. Volatility continued throughout the week, but investors were encouraged by China’s efforts to shore up its stock market and support economic growth. Oil prices fell further, but picked up by the end of the week. The market volatility has left investors struggling to figure out where share prices should be. Volatility is expected to decrease in coming days, but may continue for a while.

The economic data were mixed. Real GDP rose at a 3.7% annual rate in the government’s second estimate (versus 2.3% in the advance estimate), but that followed a 0.6% pace in 1Q15 (for a 2.2% average in the first half). Private Domestic Final Sales rose at a 3.3% annual rate (vs. +2.5% in the advance estimate and 2.0% in 1Q15). Personal income and spending figures for July were close to expectations, with inflation continuing to trend at a low level (excluding food & energy, the PCE Price Index rose 1.2% y/y, versus the Fed’s goal of 2%.

Next week, fresh August figures will begin to roll in. The data ought to be more important for the markets, assuming worries about China begin to lessen. The ISM surveys have some potential to surprise. However, the focus will be on Friday’s employment numbers. There is a fairly large amount of statistical noise in the monthly payroll estimate. The three-month average reduces that uncertainty, but the markets will still concentrate on the headline figure. Payrolls are expected to have expanded at a moderately strong pace. The unemployment rate is likely to edge a bit lower.


Indices

  Last Last Week YTD return %
DJIA 16654.77 16990.69 -6.55%
NASDAQ 4812.71 4877.49 1.62%
S&P 500 1987.66 2035.73 -3.46%
MSCI EAFE 1731.13 1795.20 -2.47%
Russell 2000 1153.61 1172.52 -4.24%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.25 3.25
Fed Funds 0.14 0.08
30-year mortgage 3.99 4.10

Currencies

  Last 1 year ago
Dollars per British Pound 1.545 1.658
Dollars per Euro 1.129 1.318
Japanese Yen per Dollar 120.210 103.930
Canadian Dollars per Dollar 1.321 1.090
Mexican Peso per Dollar 16.933 13.074

Commodities

  Last 1 year ago
Crude Oil 42.56 93.88
Gold 1126.70 1285.22

Bond Rates

  Last 1 month ago
2-year treasury 0.68 0.67
10-year treasury 2.13 2.20
10-year municipal (TEY) 3.43 3.54

Treasury Yield Curve – 08/28/2015


As of close of business 8/27/2015


S&P Sector Performance (YTD) – 08/28/2015



As of close of business 8/27/2015


Economic Calendar

Aug 31  —  Chicago PMI (August)
Sept 1  —  ISM Manufacturing Index (August)
Motor Vehicle Sales (August)
Sept 2  —  ADP Payroll Estimate (August)
Fed Beige Book
Sept 3  —  ECB Policy Decision
Jobless Claims (week ending 8/29)
Trade Balance (July)
ISM Non-Manufacturing Index (August)
Sept 4  —  Employment Report (August)
Sept 7  —  Labor Day (markets closed)
Sept 11  —  Producer Price Index (August)

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 August 27, 2015.

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