Presented by Mark Gallagher
General market news
• The 10-year Treasury yield continued its upward trajectory last week and opened early this Monday morning at 1.81 percent—a considerable increase from where it stood a little over two weeks ago, at 1.53 percent. Last week’s move higher is likely a response to the futures market predicting a 67-percent chance of a December interest rate increase.
• The S&P 500 Index posted a loss of 0.95 percent last week. Earnings season started off on a weak note, with both Alcoa (AA) and Illumina (ILMN) falling short of expectations. The utilities sector was the best performer on the week, as growth worries in China and the poor U.S. earnings reports favored higher-yielding stocks. The Nasdaq Composite Index also moved lower, losing 1.48 percent for the week.
• Last week’s economic reports were mostly positive. The Producer Price Index posted a headline increase of 0.3 percent for September. Retail sales increased by 0.6 percent at the headline level, backed by strong monthly auto sales numbers, and other industries also fared well, as evidenced by a 0.3-percent increase outside of autos and gas. The news was not all positive, though: the University of Michigan Consumer Sentiment Index declined in its preliminary October reading. Finally, the minutes from the Federal Reserve’s last meeting showed that the case for a rate hike was still strengthening, but a majority of Fed members continue to look for improvement in inflation.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | –0.95% | –1.55% | 6.17% | 9.33% |
| Nasdaq Composite | –1.48% | –1.81% | 5.15% | 10.39% |
| DJIA | –0.56% | –0.87% | 6.28% | 10.07% |
| MSCI EAFE | –1.39% | –2.15% | 0.01% | –0.51% |
| MSCI Emerging Markets | –1.93% | –0.66% | 15.52% | 8.50% |
| Russell 2000 | –1.94% | –3.10% | 8.01% | 8.27% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –0.67% | 5.08% | 4.04% |
| U.S. Treasury | –1.05% | 3.97% | 2.74% |
| U.S. Mortgages | –0.26% | 3.50% | 3.01% |
| Municipal Bond | –1.03% | 2.94% | 4.24% |
Source: Morningstar Direct
What to look forward to
The focus this week will be on September consumer inflation, with the release of the Consumer Price Index.
We will also see data on Industrial Production, which is expected to have rebounded slightly in September.
The week will end with housing data and releases of Housing Starts and Existing Home Sales.
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.
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®