Weekly Market Update, October 31, 2016

Presented by Mark Gallagher

General market news
• The 10-year Treasury yield opened at 1.84 percent early this Monday morning, below Friday’s yield of 1.87 percent but well above the low of 1.72 percent last Wednesday. The likelihood of a rate increase at the Federal Reserve’s meeting this week is low, but the bond market seems to be pricing in a December move.
• The S&P 500 Index dropped by 0.67 percent last week. Despite a strong report on third-quarter gross domestic product (GDP) growth, market performance was subdued by a decrease in consumer sentiment and an uptick in employment costs. Further volatility came later in the week as FBI Director James Comey informed Congress that e-mails from a separate investigation may be pertinent to the Hillary Clinton e-mail case. The top-performing sectors were consumer staples, utilities, and financials, while real estate, health care, and consumer discretionary pulled the market lower. The Nasdaq Composite Index lost 1.27 percent for the week.
• The biggest economic news was the first estimate of third-quarter GDP growth, which beat initial expectations at 2.9 percent. Increases in consumption and agricultural exports helped push the indicator higher. Foreshadowing the GDP report, the advance trade report at the start of the week showed that the U.S. trade deficit had narrowed. Durable goods orders declined by 0.1 percent in September, due in large part to a decrease in defense aircraft orders, but core orders showed signs of improvement, rising 0.2 percent.

Equity Index Week-to-Date Month-to-Date Year-to-Date 12-Month
S&P 500 –0.67% –1.81% 5.88% 3.98%
Nasdaq Composite –1.27% –2.24% 4.68% 3.14%
DJIA 0.09% –0.69% 6.47% 4.91%
MSCI EAFE –0.38% –2.04% 0.11% –3.00%
MSCI Emerging Markets –0.84% 0.07% 16.44% 7.89%
Russell 2000 –2.49% –5.06% 5.83% 2.30%

Source: Bloomberg


Fixed Income Index Month-to-Date Year-to-Date 12-Month
U.S. Broad Market –0.84% 4.90% 4.29%
U.S. Treasury –1.23% 3.78% 3.19%
U.S. Mortgages –0.29% 3.42% 3.25%
Municipal Bond –1.13% 2.84% 3.98%

Source: Morningstar Direct

What to look forward to
This will be a busy week for economic news releases, beginning with data on Personal Income and Outlays and the ISM Manufacturing Index, which is expected to have been flat in October.

The Federal Open Market Committee is not expected to increase interest rates at its meeting.

We will also see data on Factory Orders and the release of the October 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®