Weekly Market Update, December 19, 2016

Presented by Mark Gallagher

Please note: In light of the upcoming holiday, we will not distribute the Weekly Market Update on Tuesday, December 27. (We will resume normal distribution on Tuesday, January 3.)

General market news
• Yields moved higher last week after the Federal Reserve announced on Wednesday that it would increase the federal funds rate. The 10-year Treasury yield moved from 2.42 percent to as high as 2.64 percent on Thursday, opening this Monday morning at 2.55 percent. The 30-year yield went from about 3.08 percent to 3.20 percent on Thursday, before opening at 3.13 percent this Monday. The 2-year jumped from 1.15 percent to 1.39 percent last week but was back down to 1.22 percent on Monday.
• U.S. equities were a mixed bag last week, with the S&P 500 Index losing 0.03 percent and the Dow Jones Industrial Average gaining 0.45 percent. Both indices reached record highs early in the week before giving back some of their gains when the Fed announced the rate increase. Smaller-cap stocks, which have outperformed on the year, were the worst performers last week. Telecom and utilities stocks were the week’s best-performing sectors, while industrials and materials posted the worst performance.
• Last week’s economic news was led by the Fed’s decision to increase its policy rate by 25 basis points, a full year after its first rate hike last December. In addition to this hike, which puts the fed funds rate between 0.50 percent and 0.75 percent, the Fed projects three additional rate increases next year. In other news, consumer prices felt little pressure in November, with the headline Consumer Price Index increasing 0.2 percent for the month and 1.7 percent year-over-year. Core prices also increased 0.2 percent for the month, with the year-over-year rate remaining at 2.1 percent. Retail sales were somewhat disappointing in November, rising only 0.1 percent.



Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 –0.03% 2.78% 12.84% 11.33%
Nasdaq Composite –0.11% 2.18% 10.02% 8.69%
DJIA 0.45% 3.86% 16.96% 14.84%
MSCI EAFE –0.80% 2.15% 0.33% 1.75%
MSCI Emerging Markets –2.17% –0.44% 10.72% 11.61%
Russell 2000 –1.68% 3.24% 21.79% 20.53%

Source: Bloomberg


Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.96% 1.52% 1.25%
U.S. Treasury –1.03% 0.11% –0.31%
U.S. Mortgages –1.20% 0.45% 0.39%
Municipal Bond 0.30% –0.62% –0.49%

Source: Morningstar Direct

What to look forward to
We will see housing data this week with releases of Existing and New Home Sales.

November Personal Income and Outlays data is expected to be fairly muted, and Durable Goods Orders are expected to have been weak.

The week will wrap up with the final estimate of third-quarter Gross Domestic Product, as well as Consumer Sentiment data.

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®