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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 July 25, 2014

    Stocks mixed as investors weigh conflicting signals

    The major benchmarks ended mixed for the week as investors weighed conflicting signals about the economy and corporate earnings. The Standard & Poor's 500 Index touched a new high on Thursday before falling back to end the week, while the price-weighted Dow Jones Industrial Average fared worst due to poor performance of several components. The technology-laden Nasdaq Composite performed best, helped by a rebound in biotechnology shares. Small-cap stocks lagged mid- and large-caps.

    Earnings appear to have grown faster than expected in Q2

    After a mild stumble on Monday, stocks managed to advance through most of the week, helped by a generally positive tone to the week's many second-quarter earnings reports. Analytical firm FactSet reported that, by Friday, overall earnings for companies in the S&P 500 that had reported so far this quarter had increased by 6.7%, well above the 4.9% growth expected before the reporting season began. Moreover, over three-quarters of the companies that had reported in the second quarter to date had surpassed analysts' earnings estimates.

    Biotech sector surges on trial results

    Major companies in several industries managed to top expectations during the week, but the biotechnology sector got a particular boost on Wednesday morning. Biotech stocks had suffered a severe sell-off in March and April and, while they had recovered much of their losses since, appeared headed for another downturn in early July. Part of the selling pressure may have been due to comments from Federal Reserve officials, who remarked that valuations appeared "stretched" for smaller biotech firms.

    Financial results for biotech firms can swing wildly based on clinical results, drug approvals, and other factors, however. This was illustrated during the week by Puma Technologies, which rose 300% at one point on Wednesday following news that its breast cancer drug had shown promise in clinical trials. Regarding cancer treatments more generally, T. Rowe Price Health Sciences Fund Manager Taymour Tamaddon believes that we will uncover highly effective therapies in the next decade. He is particularly excited about new drugs that enable the immune system to play a larger role in cancer therapy.

    Disappointments weigh on stocks to end the week

    Investors proved less enthusiastic about some major earnings reports following the close of trading on Thursday, however, which helped spark a sharp market decline on Friday. Most notably, Amazon reported a strong increase in revenue but larger-than-anticipated expenses, and the heavily weighted company drove many of the indexes lower.

    Housing sector held back by low pace of household formation

    Economic data also proved less encouraging as the week progressed. This pattern was particularly true in housing data, as initial enthusiasm over a solid rise in existing home sales, reported Tuesday, was offset by news on Thursday that sales of new homes had fallen sharply in June. T. Rowe Price Chief Economist Alan Levenson notes that new construction has been limited by the disappointing pace of household formation relative to job growth.

    U.S. Stocks1
    Index2 Friday's Close Week's Change % Change
    Year-to-Date
    DJIA 16960.57 -139.61 2.32%
    S&P 500 1978.34 0.12 7.03%
    NASDAQ Composite 4449.56 17.41 6.54%
    S&P MidCap 400 1405.20 -7.30 4.67%
    Russell 2000 1143.88 -7.43 -1.70%
    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 July 25, 2014

    Treasury yield curve flattens

    The yield on the benchmark 10-year U.S. Treasury note finished little changed after coming close to a 13-month low in the middle of the week. The ongoing geopolitical tensions in Ukraine and the Middle East initially increased demand for safe-haven Treasuries, but it was short lived as positive economic data—strong U.S. durable goods orders and signs of strengthening in manufacturing in China and the eurozone—triggered some selling. The difference between the yields on the 5- and 30-year Treasuries continued to compress as the yield curve flattened, reaching the lowest point in five years.

    Strong demand for new TIPS

    June consumer price index data showed a 0.3% month-over-month increase, a moderation from the inflation pace of recent months. However, the Treasury auctioned $15 billion of 10-year Treasury inflation protected securities (TIPS) at the lowest yield in over a year, indicating that many investors think that inflation will rise and are willing to pay more for inflation protection.

    Modest selling pressure on high yield bonds

    High yield bonds experienced a modest sell-off, likely as a result of a combination of the heightened geopolitical risk and worries about the overall valuation levels in the asset class. The strong fundamentals of noninvestment-grade issuers—stable earnings and cash flows, and limited near-term debt maturities—continue to support high yield bonds and kept the selling pressure contained. On the positive side, the signs of weakness in high yield demand caused the underwriters of new issues to offer higher coupons than in recent weeks.

    Another positive week for municipal debt

    Continuing their momentum from last week, municipal bonds generated positive returns. Retired employees of the city of Detroit voted to accept a restructuring plan that involves cuts to their pensions, which helps the city move closer to exiting bankruptcy. Standard & Poor's upgraded its credit rating on New York State's debt to AA+ with a stable outlook, the state's highest rating since 1972, citing New York's "strong state budget management framework."

    U.S. Treasury Yields1
    Maturity July 25, 2014 July 18, 2014
    2-Year 0.49% 0.48%
    10-Year 2.47% 2.49%
    30-Year 3.24% 3.29%

    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, July 25, 2014.

    Week Ended July 25, 2014

    International Stocks

    Foreign stock markets closed higher for the week ending July 25, 2014 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 0.43%.

     
    Region/Country Week's Return % Change Year-to-Date
    EAFE 0.43% 4.54%
    Europe ex-U.K. 0.05% 3.53%
    Denmark 0.67% 18.38%
    France -0.71% 1.37%
    Germany -1.33% -1.74%
    Italy 1.13% 11.71%
    Netherlands -0.35% -2.80%
    Spain 2.86% 11.16%
    Sweden 1.41% 2.47%
    Switzerland 0.11% 5.99%
    United Kingdom 0.10% 5.35%
    Japan 0.87% 1.72%
    AC Far East ex-Japan 1.80% 8.79%
    Hong Kong 2.60% 8.17%
    Korea 0.93% 4.02%
    Malaysia 0.46% 4.20%
    Singapore 1.49% 8.84%
    Taiwan 0.40% 13.85%
    Thailand 1.05% 22.19%
    EM Latin America 1.29% 13.31%
    Brazil 1.80% 18.89%
    Mexico 0.51% 6.21%
    Argentina -8.87% 31.65%
    EM (Emerging Markets) 1.47% 9.73%
    Hungary -0.95% -11.36%
    India 2.52% 24.69%
    Israel 1.38% 23.97%
    Russia -2.06% -10.55%
    Turkey 4.18% 32.19%
    International Bond Markets

    International bond markets in developed countries were lower this week, with the J.P. Morgan Global Government Bond Less U.S. Index losing -0.31%.

     
    Region/Country Week's Return % Change Year-to-Date
    Developed Markets -0.31% 5.51%
    Europe    
    Denmark -0.53% 3.11%
    France -0.30% 4.57%
    Germany -0.52% 3.04%
    Italy -0.11% 7.20%
    Spain -0.10% 7.79%
    Sweden 0.39% 0.53%
    United Kingdom -0.37% 7.43%
    Japan -0.36% 5.11%
    Emerging Markets 0.41% 10.45%
    Argentina -2.84% 22.08%
    Brazil 0.37% 9.29%
    Russia -0.53% 1.40%
    International Currency Markets

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

     
    Currency Close
    (July 25, 2014)
    Week's Return
    (U.S. $)
    % Change
    Year-to-Date (U.S. $)
    Japanese yen 101.820 0.42% -3.23%
    Euro 1.34331 0.57% 2.51%
    British pound 1.69751 0.54% -2.49%
    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.