Weekly Market Update

19 Mar

General market news

  • The yield on the 10-year Treasury dropped to 1.93 percent early Monday morning, its lowest level in three weeks, as investors moved into perceived safety assets on concerns over Cyprus’s debt crisis—which was front-page news.
  • Equity markets continued to push higher last week, with the S&P 500 Index rising 0.66 percent. Unlike the Dow Jones Industrial Average, though, the S&P 500 was unable to reach a new all-time high.
  • All eyes will be on the language that comes out of the Federal Open Market Committee meeting this Wednesday. No change of direction is expected in terms of security purchasing, as economic growth remains slow and unemployment high.
  • Recent economic reports continue to show an improvement in economic conditions in the United States; the employment and housing markets seem to be the main drivers.
Equity Index Week-to-Date % Month-to-Date % Year-to-Date % 12-Month %
S&P 500 0.66% 3.14% 9.96% 13.82%
Nasdaq Composite 0.16% 2.87% 7.85% 7.99%
DJIA 0.89% 3.40% 11.44% 12.54%
MSCI EAFE 1.87% 2.98% 7.43% 13.54%
MSCI Emerging Markets –2.19% –1.09% –1.08% 0.75%
Russell 2000 1.11% 4.63% 12.41% 16.26%

Source: Bloomberg

Fixed Income Index Month-to-Date % Year-to-Date % 12-Month %
U.S. Aggregate –0.30% –0.50% 3.74%
U.S. Treasury –0.43% –0.71% 2.99%
U.S. Mortgage-Backed Securities –0.05% –0.22% 2.00%
Municipal Bond –0.76% –0.05% 5.17%
U.S. Treasury: U.S. TIPS –0.30% –0.94% 4.98%

Source: Bloomberg

What to look forward to

This should be a fairly quiet week in terms of economic news. Most notably, investors will get an update on the health of the housing market. Building Permits and Housing Starts are expected to have risen a modest 2.3 percent and 2.8 percent, respectively, in February. These are considered advanced indicators of eventual new home sales, but they tend to be volatile and difficult to predict.

If the expectations of economists prove correct, Sales of Existing Homes may have risen 1.6 percent in February. Since bottoming in July 2010 at 3.5 million, sales have trended relentlessly upward. January’s sales came in at a seasonally adjusted 4.9 million. This represents a significant rebound, although sales volume remains well below the bubble-fueled peak of 7.2 million in September 2005.

Leading Economic Indicators (LEI) are expected to have risen 0.3 percent in February. Continued increases in building permit issuance, manufacturing hours, stock prices, and the money supply have generally supported LEI; however, investors have been spooked over the past couple of years by temporary declines in this index. So far, these have been false indicators and have not translated into economic recession.

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.

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Matthew J. Everson is a financial advisor located at MJ Everson Financial, 1423 13th Street, Santa Rosa, CA 95404. 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 707-968-7237.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2013 Commonwealth Financial Network®

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