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Weekly Market Snapshot

January 23, 2015

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

As expected, the European Central Bank (ECB) signaled that it would begin a quantitative easing program, purchasing €60 billion per month in public and private securities through September 2016. The amount of monthly purchases was a bit higher than anticipated, but that included the ECB's already-existing program to purchase asset-backed securities and covered bonds. The ECB's announcement sent the euro sharply lower.

The Bank of Canada surprised the markets, by cutting short-term interest rates. Canada faces a mixed reaction to lower oil prices, which will hurt energy producers in the West, but benefit energy users in the East. However, the net impact already appears to be negative.

Next week, global financial markets are expected to react to Greek election results (Sunday). The Fed policy meeting is expected to be uneventful – there is no Janet Yellen press conference and the wording of the policy statement is expected to be little changed. The advance estimate of GDP growth is always an adventure. Realistically, we could see the initial headline growth figure come in anywhere from +2.0% to +4.0%.

As a general theme, worries about the global situation are expected to keep market volatility at elevated levels in the near term. However, the fundamentals of the U.S. economy are generally improving. The drop in gasoline prices should provide a considerable benefit to consumers and small businesses through the first half of the year.


Indices

  Last Last Week YTD return %
DJIA 17813.98 17320.71 -0.05%
NASDAQ 4750.40 4570.82 0.30%
S&P 500 2063.15 1992.67 0.21%
MSCI EAFE 1780.11 1744.97 0.29%
Russell 2000 1190.37 1154.71 -1.19%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.25 3.25
Fed Funds 0.13 0.07
30-year mortgage 3.69 4.39

Currencies

  Last 1 year ago
Dollars per British Pound 1.518 1.653
Dollars per Euro 1.163 1.355
Japanese Yen per Dollar 117.700 104.300
Canadian Dollars per Dollar 1.233 1.096
Mexican Peso per Dollar 14.718 13.302

Commodities

  Last 1 year ago
Crude Oil 45.99 96.78
Gold 1286.69 1240.30

Bond Rates

  Last 1 month ago
2-year treasury 0.51 0.75
10-year treasury 1.83 2.26
10-year municipal (TEY) 2.86 3.23

Treasury Yield Curve – 01/23/2015


S&P Sector Performance (YTD) – 01/23/2015



Economic Calendar

January 25  —  Greek Elections
January 27  —  Durable Goods Orders (December)
Consumer Confidence (January)
January 28  —  FOMC Policy Decision (no press conference)
January 29  —  Jobless Claims (week ending January 24)
January 30  —  Real GDP (4Q14, advance)
Employment Cost Index (4Q14)

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 January 22, 2015.

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