Weekly Market Update, October 24, 2016

Presented by Mark Gallagher

General market news
• The 10-year Treasury yield reached a recent high of 1.81 percent last Monday before slowly heading back down, opening this Monday morning at 1.72 percent—its lowest point in about 20 days but still well above the recent low of 1.51 percent on September 7. It appears unlikely that the Federal Reserve will increase interest rates when it meets next week. The futures market puts the probability of a rate change at 17 percent, but it predicts a 67-percent chance of a hike in December.
• The S&P 500 Index moved up by 0.41 percent last week. The materials sector posted the best weekly performance as companies such as Celanese (CE) beat their earnings estimates. In the news, the European Central Bank held steady on stimulus, neither tapering nor extending its bond-buying program. Meanwhile, Federal Open Market Committee Vice Chair William Dudley stated that he would expect a rate hike this year. Neither of these stories had a dramatic impact on the market, however. The Nasdaq Composite Index also moved higher by 0.83 percent for the week.
• Last week saw positive economic data from industrial production, the consumer price index (CPI), and existing home sales. Industrial production was up 0.1 percent in September, led by mining. The CPI rose 0.3 percent in September, backed by increases in energy and rent, and existing home sales increased to 5.47 million. Housing starts didn’t fare as well, dropping to 1.047 million. This week, a number of major companies will report earnings, including General Electric (GE), Goldman Sachs (GS), International Business Machines (IBM), Johnson & Johnson (JNJ), Microsoft (MSFT), McDonald’s (MCD), and Verizon (VZ).

Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 0.41% –1.15% 6.60% 8.41%
Nasdaq Composite 0.83% –0.98% 6.03% 10.12%
DJIA 0.09% –0.77% 6.38% 8.58%
MSCI EAFE 0.49% –1.66% 0.49% –1.60%
MSCI Emerging Markets 1.59% 0.92% 17.42% 8.96%
Russell 2000 0.48% –2.63% 8.53% 8.03%

Source: Bloomberg


Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.35% 5.43% 4.47%
U.S. Treasury –0.70% 4.33% 3.38%
U.S. Mortgages –0.13% 3.59% 3.18%
Municipal Bond –0.98% 2.99% 4.28%

Source: Morningstar Direct

What to look forward to
More housing data will be released this week, with New Home Sales expected to have declined in September.

The focus of the week will be the first estimate of third-quarter Gross Domestic Product, expected to come in at 2.5 percent, and September Durable Goods Orders.

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®