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  • Review current performance analyses and weekly statistics for stock and bond markets in the U.S. and abroad, including regional and broad-based international indexes and principal currency exchange rates.

    Week Ended August 22, 2014

    Stocks rise on economic data

    Stocks recorded solid gains for the week as investors celebrated a series of positive economic reports. The Standard & Poor's 500 Index reached new all-time highs late in the week, and the Nasdaq Composite Index marked its highest level since the tech bubble of the late 1990s. The Dow Jones Industrial Average ended modestly below its mid-July peak, while the S&P MidCap 400 Index remained more substantially short of its July 1 high. The small-cap Russell 2000 Index closed the week in negative territory for the year despite a solid gain.

    Housing shows signs of resurgence

    After some downbeat economic reports the previous week, several positive economic signals cheered investors. On Tuesday, the Commerce Department reported that housing starts had jumped nearly 16% in July, helping erase a sharp fall in the previous month. The resurgence in housing activity was confirmed by Thursday's report showing a rise in existing home sales to their highest pace of the year. The pickup in housing may have partly reflected the improving job market. The Labor Department reported that weekly jobless claims had fallen back below the 300,000 level, roughly where they were at the peak of the last two economic expansions.

    Manufacturing remains strong

    While housing has been slow to recover over the last several years, the manufacturing sector has surged ahead. On Thursday, investors learned that a national gauge of manufacturing activity reached its highest level since early 2010, while the Philadelphia Federal Reserve's survey of expectations for manufacturing activity in the region produced the best result in over two decades.

    U.S. manufacturing competitiveness may offer investment opportunities

    T. Rowe Price portfolio managers are keeping a close eye on the rebound in U.S. manufacturing activity. U.S. firms are becoming increasingly competitive due to cheap and reliable domestic energy supplies, rising wages in China and other developing markets, the growing need to locate engineering staff near production facilities, and other factors. Indeed, some portfolio managers anticipate that industrials firms are likely to lead market gains in coming years.

    Inflation remains subdued

    While the week's data offered hope that a stronger economy would drive profit growth, some investors also appeared to take comfort in signs that the economy was not overheating. The Labor Department reported that consumer prices rose only 0.1% in July, the smallest increase in several months. The data raised hopes of a "goldilocks" economy-not hot enough to lead to rising interest rates and falling multiples (P/E ratios), but not so cold as to choke off continued earnings growth.

    Tensions in Ukraine appear to ease somewhat

    A final factor boosting sentiment early in the week appeared to be a partial stand-down in tensions in Ukraine. On Monday, Russia stated that the dispute over its convoy of trucks carrying what it claims is humanitarian aid had been resolved in talks with Ukraine, France, and Germany. Ukraine objected on Friday to the crossing of the trucks across its border, stating that it amounted to an invasion of its territory. Ukraine also declared it would not attack the convoy, however, which appeared to mute any reaction in the markets.

    U.S. Stocks1
    Index2 Friday's Close Week's Change % Change
    Year-to-Date
    DJIA 17001.22 338.31 2.56%
    S&P 500 1988.41 33.35 7.58%
    NASDAQ Composite 4538.55 73.62 8.67%
    S&P MidCap 400 1426.92 31.15 6.29%
    Russell 2000 1161.27 19.88 -0.20%
    This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

    1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

    2The Dow Jones Industrial Average and the Standard & Poor's 500 Stock Index of blue chip stocks, the Standard & Poor's MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.

    Week Ended August 22, 2014

    Treasury yields rise after FOMC minutes, Yellen speech

    U.S. Treasuries experienced selling pressure, pushing their yields higher, after the release of the minutes of July's Federal Reserve policy meeting. The minutes indicated that some members of the Federal Open Market Committee support raising interest rates sooner than markets previously expected. Fed Chair Janet Yellen's speech at a major economics conference in Jackson Hole, Wyoming on Friday did not dispel the somewhat more hawkish view of the FOMC minutes.

    Positive U.S. economic data

    The release of solid U.S. economic data also contributed to investors' move away from Treasuries. The Commerce Department reported that housing starts jumped nearly 16% in July, helping boost sentiment about the real estate market and its contribution to economic growth. Separately, Bureau of Labor Statistics data showed that consumer prices rose at a 0.1% monthly rate in July, the smallest increase since February. The core consumer price index, which excludes food and energy, rose less than expected.

    Flows into high yield bonds continue

    High yield funds continued to attract inflows as retail investors joined institutional investors in trying to take advantage of the attractive valuations created by the late-July sell-off in the asset class. The investment-grade corporate bond market was relatively quiet, although Bank of America's $17 billion settlement with the Department of Justice over the firm's allegedly deceptive practices related to home mortgages removed an element of uncertainty and buoyed financial-sector corporates.

    Puerto Rico's electric utility delays loan repayments

    The municipal bond market was little changed following the news at the end of last week that Prepa, Puerto Rico's electric utility, had reached a deal with its major creditors to delay repayment of almost $700 million in bank loans until March 2015. The utility will use the extra time to re-work its business plan and try to address its low cash levels.

    U.S. Treasury Yields1
    Maturity August 22, 2014 August 15, 2014
    2-Year 0.49% 0.41%
    10-Year 2.40% 2.34%
    30-Year 3.15% 3.14%

    This table is for illustrative purposes only. Past performance cannot guarantee future results.

    1Source of data: Bloomberg.com, as of 4 p.m. ET Friday, August 22, 2014.

    Week Ended August 15, 2014

    International Stocks

    Foreign stock markets closed higher for the week ending August 15, 2014 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 1.71%.

     
    Region/Country Week's Return % Change Year-to-Date
    EAFE 1.71% 1.52%
    Europe ex-U.K. 1.14% -0.89%
    Denmark 1.70% 14.29%
    France 0.52% -2.80%
    Germany 0.74% -7.58%
    Italy 1.15% 3.12%
    Netherlands 1.55% -4.66%
    Spain 0.69% 4.24%
    Sweden 2.16% -1.44%
    Switzerland 1.26% 3.54%
    United Kingdom 1.45% 2.58%
    Japan 2.89% 0.26%
    AC Far East ex-Japan 2.55% 9.91%
    Hong Kong 2.02% 10.39%
    Korea 3.12% 4.97%
    Malaysia 2.99% 4.33%
    Singapore 1.18% 7.52%
    Taiwan 2.25% 12.87%
    Thailand 3.18% 23.97%
    EM Latin America 2.97% 10.86%
    Brazil 3.80% 14.90%
    Mexico 2.30% 5.77%
    Argentina -5.59% 16.41%
    EM (Emerging Markets) 2.86% 9.50%
    Hungary 2.27% -15.51%
    India 3.94% 24.60%
    Israel -1.65% 18.28%
    Russia 5.44% -11.69%
    Turkey -3.98% 15.11%
    International Bond Markets

    International bond markets in developed countries were higher this week, with the J.P. Morgan Global Government Bond Less U.S. Index gaining 0.11%.

     
    Region/Country Week's Return % Change Year-to-Date
    Developed Markets 0.11% 5.79%
    Europe    
    Denmark 0.12% 4.12%
    France 0.28% 5.41%
    Germany 0.21% 3.88%
    Italy 1.03% 7.80%
    Spain 1.28% 9.03%
    Sweden 0.71% 0.84%
    United Kingdom 0.03% 8.00%
    Japan -0.46% 4.73%
    Emerging Markets 1.19% 9.44%
    Argentina -7.34% 9.73%
    Brazil 1.71% 9.39%
    Russia 1.81% 0.55%
    International Currency Markets

    On the currency front, the U.S. dollar was stronger against the major currencies for the week.

     
    Currency Close
    (August 15, 2014)
    Week's Return
    (U.S. $)
    % Change
    Year-to-Date (U.S. $)
    Japanese yen 102.335 0.50% -2.69%
    Euro 1.33831 0.23% 2.88%
    British pound 1.66851 0.68% -0.74%
    1U.S. dollars per national currency unit.

    Sources: Foreign stock markets and currency sections are from Rimes Technologies, using MSCI data. International bond markets are from J.P. Morgan.

    Note: All returns are in U.S. dollars. All bond indices are J.P. Morgan. All stock indices are Morgan Stanley Capital International (MSCI).

    Equity Indices
    EAFE: MSCI Europe, Australasia, and Far East Index
    Europe Ex-U.K.: MSCI Europe ex-U.K. Index
    Far East Ex-Japan: MSCI AC Far East ex-Japan Index
    Latin America: MSCI Emerging Markets Latin America Index
    Emerging Markets: MSCI Emerging Markets Index
    Bond Indices
    Developed Markets: J.P. Morgan Global Government Bond Less U.S. Index
    Emerging Markets: J.P. Morgan Emerging Markets Bond Index Plus

    All charts are for illustrative purposes only and do not represent the performance of any specific security. Past performance cannot guarantee future results.
    Copyright 2014, T. Rowe Price Investment Services, Inc., Distributor. All rights reserved.