May 14th Weekly Market Update

General market news

  • Treasuries were strong again last week, and the yield on the 10-year reached 1.69 percent during intraday trading on Thursday. Yields were back to 1.75 percent early Monday morning, as the Treasury looks to sell as much as $99 billion in 2-year, 5-year, and 7-year maturities this week.
  • Equity markets did not fare well last week, as investors decreased their exposure to both domestic and international equity positions. The S&P 500 declined a little more than 4 percent for the week.
  • Yields across the board in Treasuries and Treasury Inflation-Protected Securities (TIPS) indicate that investors are anticipating lower inflation and are also pricing in a 55-percent chance that the Federal Reserve will implement another form of quantitative easing, given that the current “Operation Twist” is set to expire at the end of June.
  • Economic reports continue to show modest overall growth. Some encouraging signs have come out of the real estate markets, offsetting some pockets of slowing growth in the manufacturing sectors.
  • German bunds sold off early Monday as investors continued to speculate that new measures will be implemented to support the region. Yields were up from late last week, when the 10-year bund reached a new low of 1.39 percent in response to worsening news out of Greece and Spain.

 

Equity Index

Week-to-Date %

Month-to-Date %

Year-to-Date %

12-Month %

S&P 500

–4.23%

–7.17%

3.86%

–1.25%

Nasdaq Composite

–5.22%

–8.67%

7.14%

–0.17%

DJIA

–3.39%

–6.09%

2.37%

1.21%

MSCI EAFE

–5.91%

–9.97%

–1.86%

–17.46%

MSCI Emerging Markets

–6.51%

–11.38%

–0.01%

–18.45%

Russell 2000

–5.40%

–8.45%

1.34%

–9.05%

 

Fixed Income Index

Month-to-Date %

Year-to-Date %

12-Month %

U.S. Aggregate

0.52%

1.94%

7.30%

U.S. Treasury

1.11%

1.25%

9.23%

U.S. Mortgage-Backed Securities

0.22%

1.44%

5.28%

Municipal Bond

0.76%

3.71%

10.37%

U.S. Treasury: U.S. TIPS

1.07%

4.00%

13.05%

 

What to look forward to

It’s unlikely that markets will be affected by domestic economic data this week, unless there is a significant surprise in housing or durable goods data. Existing Home Sales are thought to have increased 2.7 percent in April, while New Home Sales may have increased 2.1 percent, if analysts are correct.

Durable Goods Orders are expected to have increased 1 percent in April, after having tumbled 4 percent the prior month. A rebound here would be well-received. Last month, much of the decrease was explained by unusually low aircraft parts orders, but two months in a row of decreases might be viewed with some concern.

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.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2012 Commonwealth Financial Network®

Commonwealth Financial Network

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