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®

General market news
• Equity markets returned to their winning ways last week, with most major indices gaining well over 1 percent. The S&P 500 moved toward the 2,000 level with a 1.40-percent gain. Meanwhile, small-cap stocks continued to rebound from the sell-off earlier this year, gaining 2.24 percent last week. International markets lagged.
• This week should be relatively quiet in terms of economic reports. We will, however, get some more insight into the strength of the spring housing market, with both existing and new home sales data set for release early in the week.
• Treasury yields showed some volatility after last week’s Federal Open Market Committee meeting, rallying initially and then selling off later in the week. We expect the benchmark 10-year Treasury to remain range-bound in the short term, as it has for most of this year.

Equity Index 

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

1.40%                                2.16%                         7.24%                          25.85%
Nasdaq Composite

1.33%                               3.02%                          5.20%                          31.83%
DJIA

1.03%                                1.47%                          3.41%                            17.26%
MSCI EAFE 

0.87%                               1.55%                           5.83%                          26.22%
MSCI Emerging Markets

−0.35%                           1.96%                            5.37%                          18.96%
Russell 2000 

2.24%                               4.85%                           2.73%                           24.95%
Source: Bloomberg

Fixed Income Index 

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

−0.52%                                3.52%                          3.72%
U.S. Treasury 

−0.78%                               2.58%                           1.55%
U.S. Mortgages

−0.09%                               3.68%                           4.30%
Municipal Bond 

−0.44%                              6.12%                             5.71%
Source: Bloomberg

What to look forward to
The economic data schedule for the upcoming week is light, but reports on housing could provide some useful insight. Both Existing and New Home Sales data will be released, along with the S&P/Case-Shiller Home Price Index. Economists are predicting growth, albeit at a slower pace than the previous readings for these indicators.

Later in the week, surveys for Durable and Capital Goods Orders are expected to show an increase in May. We will also see data on Core Personal Consumption Expenditures (PCE) growth. After a 1.4-percent increase during the previous period, economists expect an increase of 1.6 percent year-over-year. PCE data is followed closely by the Fed as an inflation measure.

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
• The yield on the 10-year Treasury rose as high as 2.66 percent before closing last week at 2.60 percent, the same as the previous week. The 10-year opened lower on Monday, with a yield of 2.58 percent.
• Equity markets gave back some ground last week in very orderly trading. The S&P 500 closed 0.63 percent lower after briefly trading above the 1,950 level early in the week.
• The Federal Open Market Committee meets this week, with the next decision on interest rates set for Wednesday afternoon. The Fed is expected to continue tapering according to its established schedule, reducing bond purchases by $10 billion per meeting.
• Conflict in Ukraine and Iraq hasn’t had a serious impact on financial markets yet, but it could prove to be a major disruptor if hostilities continue.

Equity Index      

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

−0.63%                         0.76%                      5.76%                    20.81%
Nasdaq Composite

−0.22%                         1.66%                      3.82%                    26.78%
DJIA   

−0.84%                         0.43%                     2.36%                    13.19%
MSCI EAFE            

−0.02%                         0.89%                    5.14%                     21.61%
MSCI Emerging Mkts

1.07%                           2.84%                     6.28%                    14.67%
Russell 2000

−0.17%                         2.56%                     0.48%                   19.03%
Source: Bloomberg

Fixed Income Index      Month-to-Date %      Year-to-Date %        12-Month %
U.S. Broad Market              −0.54%                            3.50%                          2.53%
U.S. Treasury                         −0.68%                            2.68%                         0.60%
U.S. Mortgages                     −0.39%                            3.36%                           3.07%
Municipal Bond                   −0.50%                            6.05%                          4.27%
Source: Bloomberg

What to look forward to
Along with the Fed’s rate decision on Wednesday, a number of important economic data points are set for release this week. Industrial Production and Capacity Utilization will be reported on Monday, both of which are expected to show growth during May.

On Tuesday, we’ll see a significant number of reports, highlighted by the Consumer Price Index, which is expected to remain close to its 2-percent annualized rate. Housing Starts and Building Permits data will also be released. Experts anticipate a decline in both for May, indicating some slowing in new home construction despite lower interest rates.

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®