Presented by Mark Gallagher
General market news
• The yield on the 10-year Treasury jumped as high as 1.63 percent after Federal Reserve Chair Janet Yellen’s speech on Friday, yet it was as low as 1.53 percent as the market tried to assess the meaning of the language in her speech. On Monday morning, the 10-year opened at 1.61 percent—its highest open since late June. The 30-year remained well within its recent range, opening at 2.27 percent on Monday.
• The S&P 500 declined 0.67 percent last week after negative performance in the health care, consumer, and energy sectors. The health care sector, in particular, fell 1.80 percent after news broke of steep price increases for Mylan’s EpiPen. The Nasdaq Composite Index also fell slightly, by 0.35 percent.
• The economic news from last week was mixed. Although new home sales data for July was strong, increasing to 654,000 homes, existing home sales declined to 5.4 million on thin supply. Durable goods orders showed solid gains, backed by an uptick in orders from the commercial aircraft sector, but the second estimate of gross domestic product growth showed that the U.S. economy grew at a pace of just 1.1 percent, largely due to weak local and government spending.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | –0.67% | 0.00% | 7.67% | 14.27% |
| Nasdaq Composite | –0.35% | 1.26% | 5.13% | 12.50% |
| DJIA | –0.85% | 0.15% | 7.53% | 16.02% |
| MSCI EAFE | 0.18% | 0.32% | 1.90% | 3.19% |
| MSCI Emerging Markets | –0.95% | 2.90% | 15.81% | 17.72% |
| Russell 2000 | 0.11% | 1.59% | 10.04% | 11.04% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –0.43% | 5.52% | 5.60% |
| U.S. Treasury | –0.94% | 4.80% | 4.54% |
| U.S. Mortgages | –0.05% | 3.27% | 3.74% |
| Municipal Bond | 0.15% | 4.55% | 6.90% |
Source: Morningstar Direct
What to look forward to
We will touch on several important sectors in this week’s data, including the consumer, manufacturing, and the labor market.
We expect Personal Income to have increased in July, while the ISM Manufacturing Index is expected to have declined slightly in August.
The highlight of the week will be the August Employment report, which will be released Friday.
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®