Weekly Market Update, December 12, 2016

Presented by Mark Gallagher

General market news
• The 10-year Treasury opened with a yield of 2.49 percent early this Monday morning, essentially where it closed on Friday after climbing from 2.34 percent last week. A similar move occurred across the curve, with the 2-year yield opening at 1.15 percent and the 30-year yield at 3.16 percent early Monday.
• The S&P 500 Index rallied by 3.13 percent as relatively low volatility following the Italian referendum, along with news of Donald Trump’s anti-regulation cabinet appointees, helped move markets higher. On Wednesday, Trump announced that he had selected Scott Pruitt to head the Environmental Protection Agency. The Oklahoma attorney general has a track record of opposing EPA regulations. All sectors were positive last week, with financials, technology, and telecom leading the way. Trump’s comments about lowering drug prices restricted gains in the health care segment; other laggards included industrials and energy. The Nasdaq Composite Index also posted a significant gain, rising 3.60 percent.
• Economic data was mixed last week. In positive news for the service sector, the ISM Non-Manufacturing Index reached its highest level in more than a year, boosted by improvements in the business activity and employment components of the report. Factory orders increased by 2.7 percent on the month, largely backed by aircraft orders. Negative news came via the trade deficit, which grew more than expected in October. A decrease in food, beverage, and industrial exports was one cause of the widening gap.


Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 3.13% 2.81% 12.87% 12.81%
Nasdaq Composite 3.60% 2.28% 10.05% 9.77%
DJIA 3.13% 3.39% 16.43% 16.05%
MSCI EAFE 2.91% 2.98% 1.06% 1.31%
MSCI Emerging Markets 2.92% 1.76% 13.24% 13.41%
Russell 2000 5.64% 5.00% 23.91% 23.01%

Source: Bloomberg


Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.35% 2.14% 1.52%
U.S. Treasury –0.47% 0.67% –0.07%
U.S. Mortgages –0.23% 1.44% 1.23%
Municipal Bond 0.90% –0.02% 0.11%

Source: Morningstar Direct


What to look forward to
A busy week for economic data begins with November inflation news and releases of the Consumer and Producer Price indices.

We will also see data on November Retail Sales, Industrial Production, and Housing Starts.

The most anticipated news of the week will be the Federal Reserve’s rate announcement at the conclusion of its Wednesday meeting. The Fed is expected to increase short-term rates by 25 basis points.

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.

© 2016 Commonwealth Financial Network®