Presented by Rich Tegge
General market news
- Heightened anticipation of a Federal Reserve rate increase helped push the 10-year Treasury yield as high as 2.62 percent on Friday. The 10-year yield opened this Monday morning at 2.55 percent. Despite the hype surrounding a March rate hike, the longer end of the curve has remained within a range for the most part. A sustained rate hike throughout the year is likely to affect the short end of the curve more than the long end.
- After six consecutive weeks of gains, the S&P 500 Index ended its streak with a 0.40-percent loss. The Nasdaq Composite and the Dow Jones Industrial Average dropped as well, by 0.14 percent and 0.40 percent, respectively. A stronger-than-expected February jobs report has many believing that the Fed will increase rates at a faster pace than initially expected, and a March rate hike is essentially a foregone conclusion for the market at this point.
- Other news that affected the market included a report of rising U.S. oil inventories and a statement from the White House that President Trump is committed to restoring the Glass-Steagall Act. The only positive sectors last week were technology and health care. Real estate, energy, and utilities were the worst-performing sectors.
- Last week’s most important data points were related to employment. Initial jobless claims increased slightly, though the four-week rolling average remains near multi-decade lows, indicating a strong demand for labor. The employment report for February was even more positive, showing that the headline nonfarm payrolls figure beat expectations and wage growth ticked up.
| Equity Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | –0.40% | 0.45% | 6.42% | 21.82% |
| Nasdaq Composite | -0.14% | 0.65% | 9.14% | 27.26% |
| DJIA | -0.40% | 0.53% | 6.38% | 26.23% |
| MSCI EAFE | 0.42% | 0.75% | 5.16% | 13.07% |
| MSCI Emerging Markets | –0.50% | –1.03% | 7.59% | 20.31% |
| Russell 2000 | –2.04% | 1.49% | 0.80% | 30.22% |
Source: Bloomberg
| Fixed Income Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | –1.21% | -0.35% | 0.62% |
| U.S. Treasury | –1.18% | -0.47% | –1.32% |
| U.S. Mortgages | –1.06% | -0.62% | -0.30% |
| Municipal Bond | -0.87% | 0.48% | –0.24% |
Source: Morningstar Direct
What to look forward to
Several key economic data points will be announced this week. Consumer Price Index data is slated for release on Wednesday, along with the report on Retail Sales.
The Federal Open Market Committee (FOMC) meeting announcement and Janet Yellen’s press conference are scheduled for Wednesday afternoon. Both will be closely watched, as the FOMC is expected to raise interest rates, and the press conference will provide insight into the Fed chair’s outlook.
Later in the week, we’ll see the report on Housing Starts, which is an important indicator for the housing market.
The week will wrap up with the Friday release of Industrial Production data
Rich Tegge is a financial advisor located at Wealth Strategy Group 300 S. Front Street Ste C, Marquette MI 49855. 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 906-228-3696 or at rtegge@wsginvest.com.
Authored by the Investment Research team at Commonwealth Financial Network. © 2016 Commonwealth Financial Network ®
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.