Presented by Mark Gallagher
General market news
• Rates across the curve tested new highs last week. The yield on the 10-year Treasury was as high as 2.41 percent last Wednesday before falling to 2.32 percent early Monday; the 30-year yield touched 3.08 percent last Wednesday but opened lower at 2.97 percent this morning. The short end of the curve experienced some moves as well, with the 2-year yield as low as 1.04 percent last Tuesday, jumping to 1.16 percent on Friday, and opening Monday at 1.10 percent.
• There was no change in sentiment during the holiday week, as the risk-on rally extended its run. The S&P 500 was up 1.45 percent, hitting a new all-time high. The energy sector alone rose 2.2 percent in anticipation of a decision by OPEC to cut production. Telecom, materials, and consumer discretionary also performed well, the latter buoyed by better-than-expected holiday shopping forecasts. The worst-performing sectors were health care, technology, and real estate. The Nasdaq Composite Index also posted an all-time high after rising 1.46 percent on the week.
• The economic news last week was mostly positive. Existing home sales beat expectations, rising more than 2 percent for October due to strength in the single-family homes market. Durable goods orders climbed 4.8 percent, as the commercial aircraft segment had a strong October. On the other side of things, new home sales showed signs of weakness, with three of the four regions seeing declines. Lastly, the Fed meeting minutes continued to indicate a strong case for a rate hike.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 1.45% | 4.33% | 10.45% | 8.30% |
| Nasdaq Composite | 1.46% | 4.22% | 9.08% | 6.85% |
| DJIA | 1.51% | 5.91% | 12.66% | 10.44% |
| MSCI EAFE | 1.29% | –1.66% | –1.58% | –2.83% |
| MSCI Emerging Markets | 1.34% | –5.39% | 10.35% | 5.14% |
| Russell 2000 | 2.41% | 13.19% | 20.17% | 14.17% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –2.53% | 2.33% | 2.06% |
| U.S. Treasury | –2.72% | 1.09% | 0.95% |
| U.S. Mortgages | –2.00% | 1.38% | 1.45% |
| Municipal Bond | –2.96% | –0.12% | 0.65% |
Source: Morningstar Direct
What to look forward to
Several important economic data points are expected this week, including the second estimate of third-quarter GDP.
October consumer and manufacturing data is expected to have been relatively positive in the releases of Personal Income and Outlays and the ISM Manufacturing index.
The main focus, however, will be the November Employment report.
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®