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January 28, 2013

Economic themes: Durable Goods Orders, Home Sales, Jobless Claims

  • Durable Goods Orders: New factory orders increased 4.6% in December, well above expectations of 1.6%, largely due to Boeing civilian aircraft orders, and positive figures out of the  metals and computers/electronics sectors.
  • Home Sales: With housing inventories down (particularly distressed inventories) pending home sales fell by 4.3% in December, led by declines in the Western region.  Likewise, new home sales fell 7.3% in December, but this was largely attributed to a significantly revised upward figure in November.  Prices increased 1.3%, to hover near five-year highs.
  • Jobless Claims:  Initial jobless claims hit a five-year low for the 1/19/2013 week at 330k, well below expectations of 360k.  Continuing claims fell slightly to 3.157 million, representing a 4.5 year low.
  • Economic highlights for the week ahead:
    • Tuesday, 1/29/2013: S&P Case-Shiller Home Price Index, Consumer Confidence.
    • Wednesday, 1/30/2013:  GDP, FOMC Meeting Announcement.
    • Thursday, 1/31/2013:  Jobless Claims, Personal Income and Outlays.
    • Friday, 2/01/2013:  Employment Situations, ISM Manufacturing Index.

Municipal market themes:  Nevada Budget, Fresno, Los Angeles.

  • Nevada Tax Policies: For the 2013/15 biennium, Governor Sandoval has proposed a $6.55 billion budget, representing a 5.5% increase over the previous biennium largely due to attempting to restore education cuts.  This begs the question, how should the increase in spending be funded?  The good news for residents: personal state income taxes are not on the table.  The bad news for residents: everything else is.  The low-hanging fruit is expected to be businesses with large tax exemptions, but expect a large political battle in the coming weeks.
  • Fresno, CA: Moody’s Investor Service downgraded $318 million in debt for the distressed City, with lease-supported obligations to Ba1, and pension obligation, judgement obligations, and certificates of particiapation bonds downgraded to Ba2, citing, “the City’s exceedingly weak financial position, the above average burden of these obligations on the City’s finances, and the continued weakness of the City’s economy.”
  • Los Angeles, CA: Moody’s Investor Service upgraded general obligation bonds from the City, citing assessed value stability in the region.

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