General market news
- The Federal Reserve rate hike last week reflected growing confidence in the U.S. economy, pushing equity markets higher. Meanwhile, the 10-year Treasury yield dropped from as high as 2.62 percent to below 2.5 percent. Historically, this has been typical behavior for the longer end of the curve. Volatility is to be expected as the Fed increases rates, but the 10- to 30-year part of the curve tends to perform better than the short end in these scenarios.
• All three major U.S. indices posted modest gains last week. The Nasdaq Composite led the way with a gain of 0.70 percent, followed by the S&P 500 and Dow Jones Industrial Average, which ticked up by 0.28 percent and 0.08 percent, respectively. As widely expected, the Fed raised short-term interest rates by 25 basis points on Wednesday. Fed Chair Janet Yellen said that she continues to expect two additional rate hikes in 2017. The market favored “bond proxy” stocks last week, with the real estate, telecom, and utilities sectors posting the best performance as financials and health care cooled off.
• In other news, the Liberal Party defeated the more populist Freedom Party in the Dutch elections, showing that the Netherlands and Europe may still favor an environment of globalization and free trade, despite rising populist sentiment around the world. Markets will be watching to see if France and Germany follow suit in their elections later this year.
• A number of important data points were reported last week. Consumer Price Index data came in slightly above expectations, marking a five-year high for the index on an annual basis. Retail sales data fell slightly short of expectations. As expected, the Fed increased the federal funds rate, showing that it has a positive outlook for the U.S. economy. Finally, housing starts came in higher than expected, which bodes well for future growth in the housing market.
|MSCI Emerging Markets||4.29%||3.21%||12.20%||21.40%|
|Fixed Income Index||Month-to-Date||Year-to-Date||12-Month|
|U.S. Broad Market||–0.71%||0.15%||0.36|
Source: Morningstar Direct
What to look forward to
This week will be quieter than last, with most of the news coming from the housing market. On Wednesday, Existing Home Sales data is scheduled for release. The next day, New Home Sales figures will be reported. Both metrics are expected to rise, given high levels of home-builder confidence and low interest rates.
The week will end with Friday’s release of Durable Goods Orders data. This indicator is often seen as a proxy for business investment and sentiment.