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

The economic calendar was thin. Retail sales rose somewhat more than expected in February, but January figures were revised lower. February is a throwaway month for most retailers, a transition from January clearance to spring sales promotions. The trade deficit narrowed in January, with declines in both imports and exports, but one shouldn't make too much of one particular month’s worth of data.

The bond market had little trouble absorbing Treasury supply (3- and 10-year notes and 30-year bonds). Equities meandered to a mixed finish.

Next week, the economic calendar is packed. The focus will be on the Federal Open Market Committee’s (FOMC) policy announcement. Note that this will be a one-day meeting. No change in the federal funds target range is expected and it’s likely that the Fed will retain its “extended period” language (although that will have to be abandoned at some point). The Fed’s Board of Governors may increase the discount rate again, as part of the normalization of monetary policy – not a tightening of credit for consumers and businesses – but there shouldn’t be any rush. The Fed’s Beige Book recently noted “modest” improvement in the economy, so there should be little change in the wording of the Fed’s economic assessment.

February industrial production and residential construction figures are expected to reflect some impact from the weather (heavy snow in the East). Inflation figures should be relatively low, with a small drop in gasoline prices. At the consumer level, core inflation is likely to see some downward pressure from weakening rents. The Index of Leading Economic Indicators should post a smaller increase in February – compared to the 0.3% rise in January – as components will be more mixed (including a drop in the factory workweek, reflecting the unfavorable weather).

Indices

	Last	Last Week	YTD return %
DJIA	10611.84	10444.14	1.76%
NASDAQ	2368.46	2292.31	4.38%
S&P 500	1150.24	1122.97	3.15%
MSCI EAFE	1563.33	1527.84	-1.10%
Russell 2000	677.22	652.47	8.29%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	3.25
Fed Funds	0.25	0.25
30-year mortgage	5.0	5.14

Currencies

	Last	1-year ago
Dollars per British Pound	1.504	1.381
Dollars per Euro	1.367	1.278
Japanese Yen per Dollar	90.550	97.500
Canadian Dollars per Dollar	1.027	1.285
Mexican Peso per Dollar	12.617	15.052

Commodities

	Last	1-year ago
Crude Oil	82.11	42.33
Gold	1108.25	909.43

Bond Rates

	Last	1-month ago
2-year treasury	0.97	0.82
10-year treasury	3.75	3.67
10-year municipal (TEY)	4.58	4.83

Treasury Yield Curve – 3/12/2010

S&P Sector Performance Charts – 3/12/2010

Economic Calendar

March 15	—	Empire State Manufacturing Index (March) Industrial Production (February) Homebuilder Sentiment (March
March 16	—	Import Prices (February) Residential Construction (February) FOMC Meeting (decision expected around 2:15 p.m.)
March 17	—	Producer Price Index (February)
March 18	—	Jobless Claims (week ending March 13) Leading Economic Indicators (February) Consumer Price Index (February)
March 20	—	Bernanke Speaks (on the role of community banks)
March 23	—	Existing Home Sales (February)
March 24	—	Durable Goods Orders (February) New Home Sales (February)