Presented by Mark Gallagher
General market news
• The Treasury curve rallied last week, pushing yields below 2.40 percent, a strong support level. Many factors contributed to the move lower—from as high as 2.68 percent to 2.38 percent—including less-favorable economic numbers and continued geopolitical risk.
• Friday’s 1.12-percent rally for the S&P 500 (thanks, in part, to strong employment data) wasn’t enough to offset weakness earlier in the week, and the S&P ended up declining 0.72 percent. Higher-beta indices such as the MSCI Emerging Markets and the Russell 2000 fared significantly worse, with losses of 3.05 percent and 1.28 percent, respectively.
• This week marks the unofficial start of earnings season. Investors are eagerly anticipating an update on earnings strength and corporate outlooks for the rest of the year, but reporting season also brings with it some added volatility.
| Equity Index | Week-to-Date % | Month-to-Date % | Year-to-Date % | 12-Month % |
| S&P 500 | −0.72% | −0.20% | 8.12% | 19.65% |
| Nasdaq Composite | −0.78% | −0.39% | 8.15% | 20.08% |
| DJIA | −0.57% | −0.17% | 4.42% | 16.07% |
| MSCI EAFE | −3.03% | −2.52% | −3.29% | 2.18% |
| MSCI Emerging Markets | −3.05% | −1.27% | 1.25% | 1.48% |
| Russell 2000 | −1.28% | 0.29% | −4.12% | 4.51% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date % | Year-to-Date % | 12-Month % |
| U.S. Broad Market | 0.33% | 4.69% | 4.38% |
| U.S. Treasury | 0.35% | 4.01% | 3.01% |
| U.S. Mortgages | 0.29% | 4.51% | 3.94% |
| Municipal Bond | 0.19% | 8.54% | 8.89% |
Source: Bloomberg
What to look forward to
The beginning of this week will feature Consumer Credit data, which is expected to show a decrease after its previous strong showing.
On Wednesday, investors will gain further insight into the Federal Reserve’s thinking with the release of the Federal Open Market Committee meeting minutes. Also on Wednesday, Alcoa kicks off earnings season, reporting its third-quarter results.
The week will end with a report on Wholesale Inventories, which are expected to increase.
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. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS.
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Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Avenue, 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.
© 2014 Commonwealth Financial Network®