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

The economic data were mixed, but generally disappointing. Auto sales boosted retail sales to a 1.4% gain in October, but ex-autos, sales rose a lackluster 0.2%. Industrial production edged up 0.1% in October, boosted by a weather-related gain in the output of utilities. Manufacturing output slipped 0.1% following a gain of 3.7% over the three previous months.

The Consumer Price Index (CPI) rose 0.3% in October, boosted by higher prices of motor vehicles (there was early discounting this year). Ex-food and energy, the CPI rose 0.2%, but 90% of that was due to vehicle prices, according to the Bureau of Labor Statistics. Residential construction figures were weak, reflecting the usual volatility in the multi-family sector, as well as homebuilder concerns about the pending expiration of the first-time homebuyer tax credit – which has since been extended.

Federal Reserve Chairman Ben Bernanke said that the recent pickup in growth “reflects more than purely temporary factors,” and that “continued growth next year is likely.” However, he cautioned that “some important headwinds – in particular, constrained bank lending and a weak job market – likely will prevent the expansion from being as robust as we would hope.” Bernanke said that Fed officials “are attentive to the implications of changes in the value of the dollar,” and that a commitment to the Fed’s dual objectives (low inflation and maximum sustainable growth), together with the underlying strength of the U.S. economy, “will help ensure that the dollar is strong and a source of global financial stability.” It’s very unusual for the Fed to comment on the dollar – which falls under the Treasury’s jurisdiction – but the Fed does take into account the dollar’s impact on growth and inflation when it sets monetary policy.

Next week, the data bunch up on Tuesday and Wednesday. Treasury supply may be an issue for the bond market. With so much on the plate, the markets may have trouble digesting it all. The highlight may be the gross domestic product (GDP) revision. Most components have either been revised lower or have been reported to be less than was assumed in the advance GDP report (my forecast: a 2.8% annual rate vs. +3.5% in the advance estimate).

Have a great Thanksgiving.

Indices

	Last	Last Week	YTD return %
DJIA	10332.44	10197.47	17.73%
NASDAQ	2156.82	2149.02	36.76%
S&P 500	1094.90	1087.24	21.22%
MSCI EAFE	1568.37	1581.11	26.75%
Russell 2000	585.68	580.32	17.26%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	4.00
Fed Funds	0.25	1.00
30-year mortgage	5.02	6.05

Currencies

	Last	1-year ago
Dollars per British Pound	1.665	1.506
Dollars per Euro	1.491	1.259
Japanese Yen per Dollar	88.880	96.580
Canadian Dollars per Dollar	1.065	1.241
Mexican Peso per Dollar	13.053	13.178

Commodities

	Last	1-year ago
Crude Oil	77.46	53.62
Gold	1141.18	735.65

Bond Rates

	Last	1-month ago
2-year treasury	0.71	1.00
10-year treasury	3.36	3.47
10-year municipal (TEY)	5.00	5.09

Treasury Yield Curve – 11/20/2009

S&P Sector Performance Charts – 11/20/2009

Economic Calendar

November 23	—	Existing Home Sales (October) Treasury Note Auction – $44 billion in 2-year note
November 24	—	Real GDP (3Q09, 2nd estimate) S&P/Case-Shiller Home Prices (September) Consumer Confidence (November) Treasury Note Auction – $42 billion in 5-year notes FOMC Minutes (November 3/4)
November 25	—	Jobless Claims (week ending November 21) Personal Income and Spending (October) Durable Goods Orders (October) Consumer Sentiment (November) Treasury Note Auction - $32 billion in 7-yr notes
November 26	—	Thanksgiving Day (markets closed)
November 27	—	Markets close early
November 30	—	Chicago Purchasing Managers (November)
December 15/16	—	FOMC Meeting