Weekly Market Update, July 14, 2014

General market news
• The S&P 500 Index pulled back from the previous week’s record highs as investors grew cautious before second-quarter earnings season picks up this week.
• Of the 27 companies that have posted results for the second quarter, 63 percent have reported earnings above the mean estimate, and 67 percent have reported sales above the mean estimate.
• Yields on the 10-year Treasury were as high as 2.68 percent on July 3 and as low as 2.49 percent late last week. The 10-year begins this week at 2.52 percent, with what should continue to be more downward pressure. Early Monday, the yield on the 30-year Treasury stood at 3.33 percent, close to its recent low.
• The Federal Reserve released the minutes from its most recent meeting last week, indicating that it would end its bond buying by October 19 of this year. If the Fed’s recent moves toward ending easing are any guide, we should expect lower rates heading into the fall.

Equity Index

Week-to-Date %            Month-to-Date %           Year-to-Date %          12-Month %
S&P 500

−0.85%                                     0.45%                                    7.61%                           19.92%
Nasdaq Composite

−1.56%                                     0.20%                                     6.41%                          25.00%

−0.68%                                     0.77%                                     3.46%                          12.20%

−2.45%                                    −1.38%                                    3.79%                          17.33%
MSCI Emerging Markets  

0.05%                                        1.39%                                    7.61%                           15.75%
Russell 2000 

−3.97%                                    −2.74%                                   0.36%                           13.74%
Source: Bloomberg


Fixed Income Index 

Month-to-Date %               Year-to-Date %                     12-Month %
U.S. Broad Market 

−0.05%                                     4.06%                                       4.63%
U.S. Treasury 

−0.02%                                      3.19%                                        2.59%
U.S. Mortgages

−0.17%                                      3.87%                                       5.04%
Municipal Bond

−0.46%                                      6.10%                                       6.53%
Source: Bloomberg

What to look forward to
A number of important consumer and producer data points are due this week. We begin with a look at various Retail Sales measures, which are expected to show a decent jump during June. Later in the week, we will get information on Housing Starts and Building Permits. Both measures are expected to rebound after declining in May.

On Wednesday, we’ll see the Fed’s Beige Book, along with several economic numbers that the Fed watches closely. Producer Price Index numbers are forecast to show a small increase month-over-month; however, they are expected to increase at a slower pace year-over-year.

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.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2014 Commonwealth Financial Network®