General market news • The S&P 500 Index gained 1.40 percent last week as investors continued to put money to work in the equity markets. This marks the third straight week of gains greater than 1 percent for the S&P 500. Meanwhile, the VIX closed out the week at 10.73, indicating that investor fear is at a multiyear low. • Last week’s economic reports were modestly positive, showing that the U.S. economy continues to recover after weather-related weakness in the first quarter. • Treasury rates rose again last week after bouncing off of a 52-week low in late May. The benchmark 10-year Treasury ended the week with a yield of 2.60 percent. • At its meeting next week, the Federal Open Market Committee is expected to taper its asset purchasing program by another $10 billion, reducing monthly bond purchases to $35 billion.
Equity Index Week-to-Date % Month-to-Date % Year-to-Date % 12-Month % S&P 500 1.40% 1.40% 6.44% 22.67% Nasdaq Composite 1.89% 1.89% 4.05% 27.90% DJIA 1.28% 1.28% 3.22% 15.24% MSCI EAFE 0.92% 0.92% 5.17% 22.23% MSCI Emerging Markets 1.76% 1.76% 5.17% 8.91% Russell 2000 2.74% 2.74% 0.66% 20.54% Source: Bloomberg
Fixed Income Index Month-to-Date % Year-to-Date % 12-Month % U.S. Broad Market −0.54% 3.50% 2.06% U.S. Treasury −0.66% 2.69% 0.14% U.S. Mortgages −0.39% 3.36% 3.11% Municipal Bond −0.38% 6.19% 3.02% Source: Bloomberg
What to look forward to A number of retail-focused data points will be released this week. On Wednesday, data for Retail Sales and Retail Sales ex Auto and Gas is expected to show moderate growth over the previous period. Consumer spending indicators are an important factor, given their significant impact on gross domestic product.
On Friday, we expect the Producer Price Index (PPI) to show a smaller increase on a month-over-month basis, while year-over-year growth is expected to accelerate. In addition, the University of Michigan Consumer Sentiment indicator is expected to rise from 81.9 to 83.0.
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®