May 9, 2008

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

The mid-month economic data will roll in next week. April retail sales exceeded most forecasts. The most encouraging results were from discounters. Overall. retail results were mixed – and there was a sharp drop in motor vehicle sales. However, the correlation between unit sales as reported by the various automakers and the retail auto dealership sales calculated by the Commerce Department is far from perfect.

Gasoline prices rose by about 5.8% in April, judging by the weekly figures, but the seasonal adjustment in the Consumer Price Index (CPI) will be looking for a gain of 7.7% – hence, the headline CPI should be moderate. Industrial production and residential construction likely remained weak in April. The financial markets could react to any surprise in the major data releases.

Tax rebates should help support consumer spending growth, so anecdotal reports from retailers will be of interest. It’s difficult to say what percentage of the economic stimulus money will be spent and how much will be saved or used to pay down debt and, therefore, how effectively it will offset the weakness in consumer spending.

Indices

	Last	Last Week	YTD return %
DJIA	12866.78	13010	-3.00%
NASDAQ	2451.24	2480.71	-7.58%
S&P 500	1397.68	1409.34	-4.81%
MSCI EAFE	2164.79	2126.61	-3.93%
Russell 2000	719.55	729.75	-6.07%

Consumer Money Rates

	Last	1-year ago
Prime Rate	5.00	8.25
Fed Funds	2.00	5.25
30-year mortgage	5.74	5.76

Currencies

	Last	1-year ago
Dollars per British Pound	1.954	1.989
Dollars per Euro	1.539	1.354
Japanese Yen per Dollar	103.74	120.04
Canadian Dollars per Dollar	1.017	1.105
Mexican Peso per Dollar	10.58	10.85

Commodities

	Last	1-year ago
Crude Oil	123.69	62.26
Gold	881.85	685.65

Bond Rates

	Last	1-month ago
2-year treasury	2.20	1.76
10-year treasury	3.75	3.47
10-year municipal (TEY)	6.18	6.23

Treasury Yield Curve – 5/9/2008

S&P Sector Performance Charts – 5/9/2008

Economic Calendar

May 13	—	Import Prices (April) Retail Sales (April)
May 14	—	Consumer Price Index (April)
May 15	—	Jobless Claims (week ending May 10) Industrial Production (April)
May 16	—	Residential Construction (April)
June 24-25	—	FOMC meeting

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. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. 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) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.

The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business May 8th 2008.

Weekly Market Snapshot

Market Commentaryby Scott J. Brown, Ph.D., Chief Economist