General market news
• The yield on the 10-year Treasury rose as high as 2.66 percent before closing last week at 2.60 percent, the same as the previous week. The 10-year opened lower on Monday, with a yield of 2.58 percent.
• Equity markets gave back some ground last week in very orderly trading. The S&P 500 closed 0.63 percent lower after briefly trading above the 1,950 level early in the week.
• The Federal Open Market Committee meets this week, with the next decision on interest rates set for Wednesday afternoon. The Fed is expected to continue tapering according to its established schedule, reducing bond purchases by $10 billion per meeting.
• Conflict in Ukraine and Iraq hasn’t had a serious impact on financial markets yet, but it could prove to be a major disruptor if hostilities continue.
Equity Index
Week-to-Date % Month-to-Date % Year-to-Date % 12-Month %
S&P 500
−0.63% 0.76% 5.76% 20.81%
Nasdaq Composite
−0.22% 1.66% 3.82% 26.78%
DJIA
−0.84% 0.43% 2.36% 13.19%
MSCI EAFE
−0.02% 0.89% 5.14% 21.61%
MSCI Emerging Mkts
1.07% 2.84% 6.28% 14.67%
Russell 2000
−0.17% 2.56% 0.48% 19.03%
Source: Bloomberg
Fixed Income Index Month-to-Date % Year-to-Date % 12-Month %
U.S. Broad Market −0.54% 3.50% 2.53%
U.S. Treasury −0.68% 2.68% 0.60%
U.S. Mortgages −0.39% 3.36% 3.07%
Municipal Bond −0.50% 6.05% 4.27%
Source: Bloomberg
What to look forward to
Along with the Fed’s rate decision on Wednesday, a number of important economic data points are set for release this week. Industrial Production and Capacity Utilization will be reported on Monday, both of which are expected to show growth during May.
On Tuesday, we’ll see a significant number of reports, highlighted by the Consumer Price Index, which is expected to remain close to its 2-percent annualized rate. Housing Starts and Building Permits data will also be released. Experts anticipate a decline in both for May, indicating some slowing in new home construction despite lower interest rates.
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®