TBT Financial Services

Weekly Market Snapshot

February 17, 2017

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

The economic data were mixed. Retail sales rose more than anticipated in January (partly reflecting a rebound in food sales), while December figures were revised higher. Industrial production was softer than expected, held down by a drop in the output of utilities (generally warm weather) – auto output was down, but manufacturing generally improved otherwise. The Consumer Price Index rose more than expected, possibly reflecting firms try to raise prices to see if they stick (that often occurs at the start of the year). The Producer Price Index also exceeded expectations, with some evidence of increased pipeline pressure.

Fed Chair Janet Yellen said that “waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession.” The markets took that as signaling a more hawkish stance, but she had said that exact same thing a number of times previously. She emphasized that “at our upcoming meetings, the [FOMC] will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”

Next week, the economic calendar is thin. Home sales figures for January will be subject to seasonal distortions and should not be market-moving. Fed Governor Powell speaks on Wednesday. The topic is the economy and monetary policy. Powell is seen as middle-of-the-road. Hence, the markets will take his views as a representation of the consensus among Fed policymakers. However, like Chair Yellen and Vice Chair Fischer, he is unlikely to provide any solid clues on the timing of future rate increases.


Indices

  Last Last Week YTD return %
DJIA 20619.77 20172.40 4.34%
NASDAQ 5814.90 5715.18 8.02%
S&P 500 2347.22 2307.87 3.08%
MSCI EAFE 1759.39 1734.20 4.48%
Russell 2000 1399.13 1378.53 3.09%

Consumer Money Rates

  Last 1 year ago
Prime Rate 3.75 3.50
Fed Funds 0.66 0.38
30-year mortgage 4.20 3.65

Currencies

  Last 1 year ago
Dollars per British Pound 1.249 1.429
Dollars per Euro 1.067 1.113
Japanese Yen per Dollar 113.24 114.10
Canadian Dollars per Dollar 1.307 1.367
Mexican Peso per Dollar 20.380 18.365

Commodities

  Last 1 year ago
Crude Oil 53.36 27.66
Gold 1241.60 1211.40

Bond Rates

  Last 1 month ago
2-year treasury 1.18 1.23
10-year treasury 2.40 2.49
10-year municipal (TEY) 3.69 3.45

Treasury Yield Curve – 02/17/2017


As of close of business 02/16/2017


S&P Sector Performance (YTD) – 02/17/2017



As of close of business 02/16/2017


Economic Calendar

February 20  —  Presidents Day (markets closed)
February 22  —  Existing Home Sales (January)
 —  Fed Governor Powell speaks (economy and monetary policy)
 —  FOMC Minutes (January 31 – February 1)
February 23  —  Jobless Claims (week ending February 18)
February 24  —  New Home Sales (January)
February 27  —  Durable Goods Orders (January)
February 28  —  Real GDP (4Q16, 2nd estimate)
 —  CB Consumer Confidence Index (February)
March 1  —  Personal Income and Spending (January)
February 28  —  ISM Manufacturing Index (February)
February 28  —  Fed Beige Book
February 28  —  Motor Vehicle Sales (February)
March 10  —  Employment Report (February)
March 15  —  FOMC Policy Decision (Yellen press conference)
May 3  —  FOMC Policy Decision (no press conference)

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and 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. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.

The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor's returns. U.S. 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. U.S. 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 U.S. 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. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by its financial advisors. Data source: Bloomberg, as of close of business February 16, 2017.

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