Weekly Market Update, October 27, 2014

Presented by Mark Gallagher

General market news
• Equities were in rally mode last week, with the S&P 500 Index gaining 4.14 percent. The technology sector was particularly strong, helping to propel the Nasdaq Composite Index to a gain of 5.30 percent.
• Treasury yields stabilized last week after the roller-coaster ride the week before. The yield on the 10-year note began the week above 2.20 percent and remained north of that key mark, which we believe could be the lower support level. The 10-year yield opened this Monday morning at 2.27 percent, and the 30-year yield was above 3 percent again.
• One event that could have an impact on yields is the Federal Open Market Committee (FOMC) meeting on Wednesday, when the Fed is expected to announce the end of its quantitative easing program. This could put some downward pressure on yields, as it has the last three times the Fed pulled support.
• Just shy of the halfway point for earnings season, results are quite strong, with 72 percent of companies beating expectations. Earnings growth year-to-date is 9 percent over the first three quarters of 2013.


Equity Index Week-to-Date % Month-to-Date % Year-to-Date % 12-Month %
S&P 500 4.14% −0.29% 8.03% 14.45%
Nasdaq Composite 5.30% −0.19% 8.37% 15.57%
DJIA 2.62% −1.28% 3.26% 10.89%
MSCI EAFE 2.30% −3.70% −4.48% −3.18%
MSCI Emerging Markets 0.52% −2.25% 0.25% −2.11%
Russell 2000 3.38% 1.61% −2.87% 1.32%

Source: Bloomberg


Fixed Income Index Month-to-Date % Year-to-Date % 12-Month %
U.S. Broad Market 1.20% 5.61% 4.50%
U.S. Treasury 1.38% 5.09% 3.55%
U.S. Mortgages 1.04% 5.29% 4.05%
Municipal Bond 0.71% 9.11% 8.88%

Source: Bloomberg

What to look forward to
This week will feature several significant economic reports with the potential to impact markets. First, Durable Goods Orders, which have shown quite a bit of volatility recently, are expected to increase after dropping last month.

S&P/Case-Shiller Home Price Index data will be released Tuesday, with expectations for a rise in month-on-month home prices. This will be followed by the FOMC Rate Decision on Wednesday, when the Fed is expected to announce the end of its asset-purchasing program.

We will see the advance release of Third-Quarter GDP on Thursday, with expectations for a 3-percent growth rate over the quarter. The week will end with data on Personal Income and the University of Michigan Confidence indicator.

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.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Avenue, 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.

© 2014 Commonwealth Financial Network®