Weekly Market Update, May 19, 2014
Mark R. Gallagher
General market news
- Equity markets were mixed last week, with very few trends apparent. The S&P 500 stayed essentially flat while the Nasdaq gained 0.53 percent and the Dow lost 0.45 percent. Once again, the MSCI Emerging Markets Index was a top performer.
- After breaking through the key 2.60-percent level—the lower end of the channel we’ve seen over the last five months—the 10-year Treasury yield has remained below that mark for five days. The next strong support level is 2.50 percent, followed by 2.47 percent, which was tested on Thursday. A move below 2.47 percent would likely cause a flight-to-safety trade, pushing yields considerably lower.
- Meanwhile, the long end of the curve has seen strong performance since the beginning of the year. The yield on the 30-year Treasury has moved from almost 4 percent on January 1 to as low as 3.13 percent last week.
- Economic news continues to be strong, especially in regard to employment and a pickup in inflation—two of the Federal Reserve’s most closely watched data points.
| Equity Index | Week-to-Date % | Month-to-Date % | Year-to-Date % | 12-Month % |
| S&P 500 | 0.03% | −0.15% | 2.40% | 16.17% |
| Nasdaq Composite | 0.53% | −0.43% | −1.57% | 19.62% |
| DJIA | −0.45% | −0.30% | 0.42% | 10.86% |
| MSCI EAFE | 0.60% | 0.64% | 3.06% | 13.13% |
| MSCI Emerging Markets | 2.26% | 3.50% | 3.34% | 1.01% |
| Russell 2000 | −0.34% | −2.05% | −4.80% | 13.40% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date % | Year-to-Date % | 12-Month % |
| U.S. Broad Market | 0.83% | 3.65% | 0.95% |
| U.S. Treasury | 0.80% | 3.08% | −0.44% |
| U.S. Mortgages | 0.66% | 3.23% | 1.81% |
| Municipal Bond | 1.17% | 6.38% | 1.84% |
Source: Bloomberg
What to look forward to
This should be an exceptionally quiet week on the economic front. The only reports of any real importance will be related to housing. Existing Home Sales are expected to have risen 2.2 percent in April, while New Home Sales might have been up as much as 10 percent, after having fallen 14.5 percent the previous month. Obviously, these data points are both somewhat volatile, but hopefully analysts are correct that sales volume may be making a rebound.
Leading Economic Indicators might have increased 0.3 percent in April. This report is unlikely to make a big impact unless it is surprisingly weak.
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 Bank of America Merrill Lynch U.S. Broad Market Index tracks the performance of U.S. dollar-denominated investment-grade debt publicly issued in the U.S. domestic market, including U.S. Treasury, quasi-government, corporate, securitized, and collateralized securities. The Bank of America Merrill Lynch U.S. Treasury Index tracks the performance of U.S. dollar-denominated sovereign debt publicly issued by the U.S. government in its domestic market. The Bank of America Merrill Lynch U.S. Mortgage-Backed Securities Index tracks the performance of U.S. dollar-denominated fixed-rate and hybrid residential mortgage pass-through securities publicly issued by U.S. agencies in the U.S. domestic market. The Bank of America Merrill Lynch U.S. Municipal Securities Index tracks the performance of U.S. dollar-denominated investment-grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market.
###
For IARs: (Advisor Name) is a financial advisor located at (DBA Name and Registered Branch Office Address). (He/She) offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. (He/She) can be reached at (Advisor Phone Number) or at (Advisor E-Mail).
For Registered Representatives: (RR Name) is a financial consultant located at (DBA Name and Registered Branch Office Address). (He/She) offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. (He/She) can be reached at (RR Phone Number) or at (RR E-Mail).
Authored by the Investment Research team at Commonwealth Financial Network.
© 2014 Commonwealth Financial Network®