Presented by Mark Gallagher
General market news
• The 10-year Treasury yield tested the 2.35-pecent level this Monday morning. From a technical standpoint, the next key levels are 2.50 percent, 2.65 percent, and eventually 3 percent. Although yields have certainly moved off the bottom since July, keep in mind that the 30-year bond, which opened at 3.02 percent this morning, closed the week of Thanksgiving at 3.01 percent in 2014 and at 3.02 percent in 2015.
• The S&P 500 Index continued its upward move last week with a return of 0.89 percent. Positive economic data and continued favorable reaction to the proposed policies of President-elect Donald Trump helped markets shift higher. In an appearance before Congress on Thursday, Janet Yellen offered no surprises, stating that she sees a rate increase occurring “relatively soon.” The market continues to have high expectations for a December hike. The telecom, financial, and energy sectors led performance last week; the worst-performing sectors were materials, consumer staples, and health care. The Nasdaq Composite Index gained 1.68 percent for the week.
• Last week’s economic news was mostly good, with positive data for retail sales, housing starts, and consumer prices. Led by motor vehicle sales, headline retail sales increased 0.8 percent, beating expectations, and the previous month’s sales were also revised up, from 0.4 percent to 1 percent. Housing starts saw improvement in both single- and multi-family homes, and consumer prices were up 0.4 percent in October. Core prices increased by 0.1 percent, boosted by higher gasoline prices, putting the annual core inflation rate at 2.1 percent. Meanwhile, industrial production remained largely stagnant.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 0.89% | 2.83% | 8.87% | 7.06% |
| Nasdaq Composite | 1.68% | 2.72% | 7.50% | 6.17% |
| DJIA | 0.26% | 4.34% | 10.98% | 9.30% |
| MSCI EAFE | –1.52% | –2.91% | –2.83% | –3.53% |
| MSCI Emerging Markets | –0.52% | –6.65% | 8.89% | 5.45% |
| Russell 2000 | 2.62% | 10.53% | 17.34% | 14.01% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –2.33% | 2.54% | 2.45% |
| U.S. Treasury | –2.57% | 1.25% | 1.33% |
| U.S. Mortgages | –1.65% | 1.75% | 1.88% |
| Municipal Bond | –2.53% | 0.32% | 1.53% |
Source: Morningstar Direct
What to look forward to
More October housing data will be released this week, including Existing and New Home Sales, which are expected to be lower, perhaps as a result of low inventory.
Durable Goods Orders are expected to have improved in October.
We will also see data on International Trade and the release of the November Federal Reserve meeting minutes.
Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million.
Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.
Authored by the Investment Research team at Commonwealth Financial Network.
© 2016 Commonwealth Financial Network®