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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 October 17, 2014

    Benchmarks end mixed after dramatic week
    The major benchmarks ended mixed for the week after a powerful Friday rally stopped the downdraft, at least temporarily, that had sent stocks sharply lower since the start of the month. By Wednesday morning, the Standard & Poor's 500 Index had sunk to levels last seen in early summer and stood just above the 10% decline threshold that is typically considered a market correction. Meanwhile, the S&P MidCap 400 Index moved into correction territory and fell below its level at the start of 2014, where it joined the small-cap Russell 2000 Index. The late rally in smaller-cap shares was particularly strong, however, helping both the mid- and small-cap benchmarks end the week with gains. The technology-heavy Nasdaq Composite Index and the large-cap benchmarks recorded losses.

    Ebola fears hurt sentiment
    Although its impact was difficult to quantify, the alarming news over the weekend that a nurse in Dallas had contracted the Ebola virus was clearly one factor weighing on sentiment as trading began on Monday. These fears deepened Wednesday, after reports that another nurse had been infected, and were probably one factor in driving stocks to their lows for the week. The Ebola concerns had their most direct impact on the industrials sector, where airline stocks sold off sharply in anticipation of reduced air travel.

    Slowing global growth and falling inflation also weigh
    Factors more directly related to the economy and markets also drove much of the selling, however. An unexpected decline in consumer spending in September helped feed Wednesday's selling, as did further signs of falling inflation in many countries. In particular, worries about the possibility of a renewed recession in Europe and slowing growth in China continued to drive a sharp decline in oil prices, which have fallen by roughly one-quarter since the summer. An unexpectedly sharp rise in U.S. oil inventories also fed fears of a global supply glut.

    Oil prices likely in long-term downward trend, but energy sector opportunities still exist
    T. Rowe Price energy analysts believe that we are in the midst of a long-term downward trend in energy prices, even if we see some recovery in the near term. Nevertheless, they continue to see very compelling opportunities among energy firms, including exploration and production companies that are reducing costs and accelerating growth through the development of their assets. Midstream/infrastructure companies could also benefit from the need to ship booming North American production to domestic and international markets. Pipelines, rails, and even barges could be key beneficiaries of North American energy supply growth.

    Possibility of tapering pause may be catalyst for market rebound
    Market sentiment turned sharply on Thursday morning, helping sustain a rally that lasted through the close of Friday's trading. The catalyst for the shift may have been an interview that St. Louis Fed President James Bullard gave to Bloomberg, in which he stated that a pause in the Fed's taper of its monthly asset purchases might be warranted at its late-October meeting. Especially because he stated that he still expected that the U.S. economy would remain healthy, some traders took the remark as a statement of implicit Fed support for equity markets, should they continue to fall.

    U.S. economy likely to prove resilient
    Indeed, more favorable economic data later in the week seemed to indicate that the U.S. economy was weathering the global slowdown. T. Rowe Price chief economist Alan Levenson notes that a fall in weekly jobless claims, reported Thursday, suggested continued healthy payroll growth, which should in turn support renewed gains in consumer spending. Business's capital expenditure plans should also support the economy, while the supply-driven drop in oil prices is likely to provide a meaningful boost to disposable incomes.

    U.S. Stocks1
    Index2 Friday's Close Week's Change % Change
    Year-to-Date
    DJIA 16380.41 -163.69 -1.18%
    S&P 500 1886.76 -19.37 2.08%
    NASDAQ Composite 4258.44 -17.80 1.96%
    S&P MidCap 400 1321.86 17.34 -1.54%
    Russell 2000 1083.94 30.51 -6.85%
    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 October 17, 2014

    Huge mid-week rally in Treasuries pushes yields lower
    U.S. Treasuries rallied furiously on Wednesday, pushing the yield on the benchmark 10-year Treasury note as low as 1.87%-its lowest level since May 2013-before easing back to 2.09% by the end of the day. A disappointing September retail sales report seemed to trigger the Treasury buying, and hedge funds racing to unwind positions that would benefit from a widely expected rate increase probably contributed to the rally. T. Rowe Price Chief U.S. Economist Alan Levenson thinks that spending will rebound in October as lower gasoline prices give consumers more discretionary spending power.

    Yields on German government debt fall, Greek yields rise
    In the eurozone, German sovereign debt yields decreased to record lows as the safe-haven debt benefited from investor concerns about global growth and the potential for deflation in Europe. However, the yield on Greek government bonds jumped amid the country's effort to make an early exit from its European Union aid program, rising above 9% for the first time since December 2013.

    Deteriorating sentiment toward high yield bonds
    High yield bonds lost ground as equity-market volatility and renewed worries about slowing global growth weighed heavily on riskier asset classes. The declines were most pronounced in the energy sector, which was hurt by plunging oil prices, and in bonds with lower credit ratings. However, T. Rowe Price high yield portfolio managers anticipate that long-term investors will move into the market to try to capitalize on the newly attractive valuations and still-strong fundamentals, helping to support the asset class. Investment-grade corporate bonds, on the other hand, generated positive returns amid increased volatility.

    Falling oil prices drag emerging markets bonds lower
    Emerging markets debt also declined as investors shunned riskier assets, although the higher- quality emerging markets were fairly resilient. Rapidly falling oil prices darkened the outlook for developing countries such as Venezuela that are heavily dependent on oil revenue. The Russian ruble continued to fall in tandem with the price of oil.

    U.S. Treasury Yields1
    Maturity October 17, 2014 October 10, 2014
    2-Year 0.37% 0.44%
    10-Year 2.20% 2.30%
    30-Year 2.98% 3.03%

    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, October 17, 2014.

    Week Ended October 17, 2014

    International Stocks

    Foreign stock markets closed lower for the week ending October 17, 2014 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), losing -0.65%.

     
    Region/Country Week's Return % Change Year-to-Date
    EAFE -0.65% -6.79%
    Europe ex-U.K. 0.31% -7.95%
    Denmark 0.69% 6.98%
    France 0.36% -10.31%
    Germany 1.89% -14.19%
    Italy -1.49% -5.08%
    Netherlands -1.16% -9.12%
    Spain -1.22% -3.22%
    Sweden 1.45% -9.30%
    Switzerland -0.11% -2.79%
    United Kingdom -0.09% -6.40%
    Japan -4.28% -9.88%
    AC Far East ex-Japan -1.48% 0.46%
    Hong Kong 0.87% 4.95%
    Korea -1.50% -10.85%
    Malaysia -1.72% -3.55%
    Singapore -2.01% -0.16%
    Taiwan -4.35% 4.49%
    Thailand -1.92% 19.85%
    EM Latin America -0.70% 1.26%
    Brazil -0.64% 4.27%
    Mexico -0.90% -1.01%
    Argentina 3.92% 15.24%
    EM (Emerging Markets) -1.28% -0.08%
    Hungary 0.60% -15.99%
    India -2.36% 20.75%
    Israel -4.58% 15.35%
    Russia 0.86% -22.40%
    Turkey 4.66% 9.02%

    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 0.96%.

     
    Region/Country Week's Return % Change Year-to-Date
    Developed Markets 0.96% 2.15%
    Europe    
    Denmark 1.34% 0.90%
    France 0.77% 0.89%
    Germany 1.33% 0.08%
    Italy -0.04% 3.31%
    Spain 0.48% 5.17%
    Sweden 1.63% -1.60%
    United Kingdom 0.75% 6.53%
    Japan 1.41% 1.06%
    Emerging Markets 0.52% 8.24%
    Argentina -1.25% 12.53%
    Brazil 0.55% 10.18%
    Russia 0.67% 0.63%

    International Currency Markets

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

     
    Currency Close
    (10/17/2014)
    Week's Return
    (U.S. $)
    % Change
    Year-to-Date (U.S. $)
    Japanese yen 106.665 -1.17% 1.46%
    Euro 1.2771 -1.12% 7.34%
    British pound 1.6101 -0.43% 2.80%

    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.