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

The economic data were mixed, generally consistent with a moderate economic recovery. Nonfarm payrolls fell by 20,000 in January, worse than expected, although not as bad as feared. December was revised to show a 150,000 decline (compared to the 85,000 reported previously), which unnerved some market participants. The November figure was revised to plus-64,000 (vs. plus-4,000). Annual benchmark revisions to the establishment survey data showed that job losses during the recession were more severe than estimated earlier – the downward revision was even worse than the Bureau of Labor Statistics had anticipated back in October. The December 2009 level of payrolls was revised down by 1,363,000 (or -1.0%).

Still, there were several positive aspects to the report. The unemployment rate fell to 9.7% (from 10.0% – and that’s compared to expectations of a rise to 10.1%). The drop came even as labor force participation advanced 0.1 percentage point. Payrolls gains were reported in manufacturing, retail, and temp-help, while average weekly hours edged higher – these are signs that typically bode well for new hiring.

Concerns about Greece’s debt situation (and Spain’s, as well) lifted the dollar, but dampened U.S. stock market sentiment. Market reaction to the January employment report was mixed as investors tried to balance the good news with the bad.

Next week, the economic calendar thins out. The report on retail sales will be the clear highlight. Unit motor vehicle sales slumped last month (mostly due to problems at Toyota), which should dampen the overall figure (moderate otherwise). Treasury supply is not expected to be a major problem for the bond market.

Indices

	Last	Last Week	YTD return %
DJIA	10002.18	10120.46	-4.08%
NASDAQ	2125.43	2179	-6.33%
S&P 500	1063.11	1084.53	-4.66%
MSCI EAFE	1488.6	1517.2	-5.83%
Russell 2000	589.68	607.93	-5.71%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	3.25
Fed Funds	0.25	0.25
30-year mortgage	5.05	5.38

Currencies

	Last	1-year ago
Dollars per British Pound	1.579	1.450
Dollars per Euro	1.376	1.285
Japanese Yen per Dollar	89.110	89.680
Canadian Dollars per Dollar	1.073	1.227
Mexican Peso per Dollar	13.082	14.535

Commodities

	Last	1-year ago
Crude Oil	73.14	40.32
Gold	1064.08	900.42

Bond Rates

	Last	1-month ago
2-year treasury	0.78	0.96
10-year treasury	3.60	3.82
10-year municipal (TEY)	4.94	5.05

Treasury Yield Curve – 2/5/2010

S&P Sector Performance Charts – 2/5/2010

Economic Calendar

February 9	—	Wholesale Trade (December) Treasury Note Auction (3-year notes)
February 10	—	Trade Balance (December) Treasury Note Auction (10-year notes)
February 11	—	Jobless Claims (week ending February 6) Retail Sales (January) Business Inventories (December) Treasury Bond Auction (30-year bonds
February 12	—	Consumer Sentiment (mid-February)
February 15	—	Presidents' Day Holiday (markets closed)
February 17	—	Residential Construction (January) Industrial Production (January) FOMC Minutes (1/26-27)
March 16	—	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.

Material prepared by Raymond James for use by its financial advisors.

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 February 4th, 2010.

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