Presented by Mark Gallagher
General market news
• The yield on the 10-year Treasury moved below 1.60 percent for the first time since breaking that level on September 8. At the time, less dovish commentary from the European Central Bank, coupled with surprisingly hawkish remarks from Boston Fed President Eric Rosengren, helped push yields higher. Rosengren then called for a September rate increase, even going so far as to dissent from last week’s no-hike decision by the Federal Open Market Committee.
• Led by the utilities and telecom sectors, the S&P 500 Index continued on a positive course, with a gain of 1.20 percent last week. The market reacted positively to the news that the Federal Reserve would keep rates steady. The “lower for longer” stance on interest rates should extend the favorable performance of higher-yielding stocks in the near future. The Nasdaq Composite Index moved roughly in line with the S&P 500, gaining 1.18 percent for the week.
• Economic data last week was somewhat negative, showing that both housing starts and existing home sales dropped in August. Despite an increase in building permits for single-family homes, multifamily permits fell. Existing home sales decreased by 2.3 percent, mainly due to lack of supply. The biggest news was the Federal Reserve’s decision not to raise rates, though many believe there is a strong case for a December rate hike.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 1.20% | –0.18% | 7.62% | 14.13% |
| Nasdaq Composite | 1.18% | 1.82% | 6.95% | 13.05% |
| DJIA | 0.76% | –0.67% | 6.94% | 15.20% |
| MSCI EAFE | 3.15% | 1.06% | 2.87% | 7.31% |
| MSCI Emerging Markets | 3.65% | 2.00% | 18.13% | 19.08% |
| Russell 2000 | 2.45% | 1.28% | 11.65% | 11.75% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –0.12% | 5.73% | 5.50% |
| U.S. Treasury | –0.22% | 4.98% | 4.55% |
| U.S. Mortgages | 0.23% | 3.67% | 3.90% |
| Municipal Bond | –0.54% | 3.98% | 5.83% |
Source: Morningstar Direct
What to look forward to
More housing data will be released this week, with New Home Sales expected to have decreased in August.
Durable Goods Orders are also expected to have been weak in August.
The final estimate for second-quarter Gross Domestic Product growth is projected at 1.3 percent.
The week will end with data on Personal Income and Outlays.
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.
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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®