Presented by Mark Gallagher

General market news
• Equity markets rose higher last week for the most part, thanks to a late-week surge on Friday. The Russell 2000 was the only index to post negative returns, with small-cap stocks coming under some pressure after Janet Yellen suggested that valuations are stretched in the asset class.
• With few economic releases slated for the coming week, equity markets will be paying particular attention to second-quarter earnings results, as reporting volume picks up dramatically over the next several weeks.
• Treasury bonds rallied on the heels of the Malaysian airliner crash last week. We expect news on this story, the related conflict in Ukraine, and violence in the Middle East to continue to affect markets in the short term.
• Municipal bonds performed well during the first half of the year, led by longer-dated bonds. We have, however, seen some selling of late, mainly focused in Puerto Rican debt or products that own PR bonds. We expect the market to closely follow Treasuries.

Equity Index 

Week-to-Date %           Month-to-Date %            Year-to-Date %             12-Month %
S&P 500 

0.54%                                  0.99%                                   8.19%                                 19.52%
Nasdaq Composite

0.38%                                  0.58%                                  6.81%                                  24.32%
DJIA 

0.97%                                   1.75%                                   4.47%                                 12.58%
MSCI EAFE 

0.52%                                −0.80%                                4.40%                                  16.76%
MSCI Emerging Markets  

0.61%                                  1.65%                                 7.89%                                   14.19%
Russell 2000

−0.73%                               −3.45%                             −0.37%                                   11.07%

Source: Bloomberg

Fixed Income Index 

Month-to-Date %                         Year-to-Date %                       12-Month %
U.S. Broad Market

0.03%                                                4.14%                                        4.32%
U.S. Treasury

0.09%                                               3.30%                                        2.50%
U.S. Mortgages

−0.21%                                               3.83%                                      4.64%
Municipal Bond 

−0.00%                                               6.59%                                       6.91%
Source: Bloomberg

What to look forward to
The most important data to watch for next week revolves around inflation and housing. Consumer Price Index numbers are expected to come in slightly above 2 percent on a year-over-year basis. An unexpected increase above this level could move interest rates.

We will also see data on both Existing and New Home Sales, giving us further insight into the health of the housing market.

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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Mark Gallagher is a financial advisor located at 2586 East 7th Avenue #304. 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 651-774-5427 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2014 Commonwealth Financial Network®

General market news
• The S&P 500 Index pulled back from the previous week’s record highs as investors grew cautious before second-quarter earnings season picks up this week.
• Of the 27 companies that have posted results for the second quarter, 63 percent have reported earnings above the mean estimate, and 67 percent have reported sales above the mean estimate.
• Yields on the 10-year Treasury were as high as 2.68 percent on July 3 and as low as 2.49 percent late last week. The 10-year begins this week at 2.52 percent, with what should continue to be more downward pressure. Early Monday, the yield on the 30-year Treasury stood at 3.33 percent, close to its recent low.
• The Federal Reserve released the minutes from its most recent meeting last week, indicating that it would end its bond buying by October 19 of this year. If the Fed’s recent moves toward ending easing are any guide, we should expect lower rates heading into the fall.

Equity Index

Week-to-Date %            Month-to-Date %           Year-to-Date %          12-Month %
S&P 500

−0.85%                                     0.45%                                    7.61%                           19.92%
Nasdaq Composite

−1.56%                                     0.20%                                     6.41%                          25.00%
DJIA 

−0.68%                                     0.77%                                     3.46%                          12.20%
MSCI EAFE

−2.45%                                    −1.38%                                    3.79%                          17.33%
MSCI Emerging Markets  

0.05%                                        1.39%                                    7.61%                           15.75%
Russell 2000 

−3.97%                                    −2.74%                                   0.36%                           13.74%
Source: Bloomberg

Fixed Income Index 

Month-to-Date %               Year-to-Date %                     12-Month %
U.S. Broad Market 

−0.05%                                     4.06%                                       4.63%
U.S. Treasury 

−0.02%                                      3.19%                                        2.59%
U.S. Mortgages

−0.17%                                      3.87%                                       5.04%
Municipal Bond

−0.46%                                      6.10%                                       6.53%
Source: Bloomberg

What to look forward to
A number of important consumer and producer data points are due this week. We begin with a look at various Retail Sales measures, which are expected to show a decent jump during June. Later in the week, we will get information on Housing Starts and Building Permits. Both measures are expected to rebound after declining in May.

On Wednesday, we’ll see the Fed’s Beige Book, along with several economic numbers that the Fed watches closely. Producer Price Index numbers are forecast to show a small increase month-over-month; however, they are expected to increase at a slower pace year-over-year.

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.

© 2014 Commonwealth Financial Network®

General market news
• Over the last few trading days, government debt has posted both higher and lower yields than we’ve seen in the last 30 days. The yield on the 10-year Treasury dipped as low as 2.51 percent early last week before ending the shortened week at 2.68 percent on Thursday. Early Monday morning, the 10-year yield stood at 2.64 percent.
• Equity markets started the Independence Day holiday early, with broad-based gains of more than 1 percent in the shortened week. In the middle of the pack, the S&P 500 gained 1.28 percent. Higher-beta indices, such as the Nasdaq, Russell 2000, and MSCI Emerging Markets, were the best performers for the week.
• Although there wasn’t a lot of economic news last week, the reports that were released had a noticeable impact on the market. Strong housing data early in the week, along with promising employment data at the end, seemed to signal some acceleration in those areas of the economy.

Equity Index 

Week-to-Date %         Month-to-Date %          Year-to-Date %            12-Month %
S&P 500

1.28%                                  1.31%                                  8.53%                             25.47%
Nasdaq Composite 

2.03%                                 1.78%                                 8.09%                            31.97%
DJIA

1.31%                                   1.46%                                4.17%                              16.58%
MSCI EAFE 

1.52%                                  0.96%                                6.25%                             25.10%
MSCI Emerging Markets  

1.73%                                  1.16%                                 7.37%                             19.45%
Russell 2000 

1.58%                                   1.27%                                4.50%                             23.47%
Source: Bloomberg

Fixed Income Index 

Month-to-Date                            % Year-to-Date %                           12-Month %
U.S. Broad Market

−0.65%                                                  3.44%                                                 3.79%
U.S. Treasury 

−0.70%                                                 2.49%                                                 1.62%
U.S. Mortgages 

−0.57%                                                  3.45%                                                  4.28%
Municipal Bond 

−0.47%                                                 6.09%                                                  5.98%
Source: Bloomberg

What to look forward to
The upcoming week will be very light in terms of economic releases. Investors are anticipating the Federal Open Market Committee meeting minutes on Wednesday, which could provide further insight into the direction of monetary policy.

Another indicator to keep an eye on is Consumer Credit, which tracks the amount of outstanding credit used by consumers. This number has been trending higher and can be quite volatile. An increase in consumer credit would be in line with broader confidence in the lending market.

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.

© 2014 Commonwealth Financial Network^®

• Equity markets were mixed last week, with sector-specific catalysts driving relative performance. The S&P 500 barely moved on the week, while the Nasdaq gained 70 basis points on strength in tech stocks. The Dow saw the largest drop in the domestic market, and the MSCI EAFE was the worst-performing broad-based index overall.
• Although the shortened holiday week will bring fewer economic releases, Thursday’s nonfarm payroll and unemployment reports will be closely watched and could impact markets.
• The 10-year Treasury yield dropped to 2.50 percent intraday late last week and started this week slightly above that, at 2.52 percent. The U.S. government debt yield is down from its recent high 10 days ago, when it stood at 2.66 percent. We expect continued downward pressure on the 10-year yield, with 2.80 percent being the possible high mark in the near term.

Equity Index 

Week-to-Date %     Month-to-Date %     Year-to-Date %     12-Month %
S&P 500 

−0.06%                                2.10%                           7.17%                        24.10%
Nasdaq Composite

0.70%                                  3.74%                           5.94%                  30.98%
DJIA 

−0.56%                                0.90%                           2.83%                  14.85%
MSCI EAFE

−0.98%                               0.54%                           4.77%                  23.98%
MSCI Emerging Markets

0.39%                                  2.32%                           5.75%                 16.85%
Russell 2000 

0.16%                                   5.01%                            2.89%                22.97%
Source: Bloomberg

Fixed Income Index 

Month-to-Date         % Year-to-Date %        12-Month %
U.S. Broad Market 

−0.05%                               4.01%                          4.46%
U.S. Treasury 

−0.26%                               3.10%                           2.27%
U.S. Mortgages 

0.19%                                  3.96%                          4.68%
Municipal Bond

−0.01%                              6.58%                           6.63%
Source: Bloomberg

What to look forward to
We have a short schedule this week due to the Independence Day holiday. As this is the first week of the month, the normal slew of employment data will be released on Thursday instead of on Friday. Economists are expecting Nonfarm and Private Payrolls to increase by roughly the same amount during June as they did in May—at just north of 200,000 jobs.

The Unemployment Rate is forecast to remain unchanged as well, at 6.3 percent.

Aside from employment data, a number of reports covering activity among manufacturing, construction, and services firms will be released. Both the ISM Manufacturing and ISM Non-Manufacturing surveys are forecast to show sentiment staying steady during June, relative to the prior readings.

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.

© 2014 Commonwealth Financial Network®