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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 29, 2014

    Good U.S. economic reports drive modest stock gains

    Stocks recorded modestly positive returns as enthusiasm about good economic data was partially offset by growing worries over the conflict between Russia and Ukraine. The gains briefly lifted the Dow Jones Industrial Average to a new intraday high, while the Standard & Poor's 500 Index closed above the 2,000 mark for the first time. The S&P MidCap 400 Index remained below its late-July peak, and the small-cap Russell 2000 Index stayed well below the highs it established early in the year. However, the small-cap benchmark moved back into positive territory for the year. Trading was generally subdued ahead of the holiday weekend.

    Business investment gaining strength

    Several economic indicators confirmed that the economy was strengthening at mid-year. The most notable figure was a 22.6% surge in durable goods orders in July. While the rise was driven almost entirely by a boost in aircraft orders, an upward revision to May and June figures showed a broad increase in consumer and business demand for items such as electronics and machinery. T. Rowe Price chief economist Alan Levenson observes that rising order backlogs suggest that momentum on capital expenditures will continue into the second half of the year.

    Healthy growth in second quarter

    The good news on capital investment was reflected in an upward revision to economic growth in the second quarter. The Commerce Department reported that gross domestic product grew at an annualized pace of 4.2% from May to June, better than its 4.0% preliminary estimate. Investors also received some good news on the housing market. Pending home sales surprised most experts by rising in July to their highest level in nearly a year, although sales completed during the month fell a bit.

    Hopes for less austerity in Europe

    Ironically, weakness in the European economy might have provided U.S. stocks their biggest lift. U.S. markets followed their European counterparts sharply higher on Monday morning as investors reacted to a speech by European Central Bank head Mario Draghi delivered late last Friday. The bank chairman called for fiscal policy to play a role alongside monetary policy in boosting eurozone economies, raising hopes among some investors that less budget cutting would result in better growth and healthier corporate profits.

    Worsening Ukraine situation dampens gains

    The week's gains might have been greater if not for the overhang of the conflict in Ukraine. Stocks fell sharply at the start of trading on Thursday as news broke that more Russian soldiers had crossed the border and opened a new front in the fighting. The action raised fears that the West would respond with further sanctions, which would harm European economies with strong economic ties to Russia.

    U.S. Stocks1
    Index2 Friday's Close Week's Change % Change
    Year-to-Date
    DJIA 17098.38 97.16 3.15%
    S&P 500 2003.36 14.95 8.39%
    NASDAQ Composite 4580.27 41.72 9.67%
    S&P MidCap 400 1438.44 11.52 7.14%
    Russell 2000 1174.18 12.91 0.91%
    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 29, 2014

    Record low yields for German government debt

    Yields on European government bonds hit new lows as investors continued to buy safe-haven debt amid worries about the conflict between Russia and Ukraine. The yield on 10-year German government bonds, called bunds, reached a record low of 0.88%. Expectations for a quantitative easing (QE) program from the European Central Bank (ECB), which could involve purchases of eurozone government debt, also continued to build, helping boost demand for the sovereign debt of eurozone countries. However, T. Rowe Price fixed income analysts believe that market expectations for an imminent launch of QE from the ECB may be overdone given the central bank's historically slow pace of change and the political hurdles that it would need to overcome.

    Treasury yields fall despite strong economic data

    The paltry yields on European government debt made U.S. Treasuries look attractive in comparison, generating demand for intermediate- and long-term Treasuries and driving their yields lower despite some strong U.S. economic data. Durable goods orders jumped 22.6% in July as a result of a surge in aircraft orders. The yields on 10- and 30-year Treasury debt reached their lowest levels in more than 12 months.

    Detroit water authority sells new bonds

    Municipal bonds generated positive returns as a result of ongoing solid demand and minimal new supply. In another step toward Detroit improving its finances and exiting bankruptcy, a judge approved $1.8 billion of new debt issuance by the city's water and sewer department. Existing Detroit water bonds will not be impaired in any future debt restructuring. Some of the new bonds received investment-grade credit status from the rating agencies.

    Positive week for investment-grade corporate bonds

    Investment-grade corporate bonds also sustained positive momentum through the week as a result of the rally in U.S. stocks and falling longer-term Treasury rates. In the high yield market, bonds issued by Momentive Performance Materials, which produces silicones for manufacturing, traded actively after the company won conditional approval for its bankruptcy reorganization. Momentive Performance has more than $4 billion in outstanding debt.

    U.S. Treasury Yields1
    Maturity August 29, 2014 August 22, 2014
    2-Year 0.49% 0.49%
    10-Year 2.34% 2.40%
    30-Year 3.08% 3.15%

    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 29, 2014.

    Week Ended August 25, 2014

    International Stocks

    Foreign stock markets closed higher for the week ending August 25, 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 0.77% 2.29%
    Europe ex-U.K. 1.12% 0.22%
    Denmark 1.09% 15.54%
    France 0.72% -2.10%
    Germany 1.47% -6.22%
    Italy 0.90% 4.05%
    Netherlands 1.77% -2.97%
    Spain 1.42% 5.72%
    Sweden 1.18% -0.27%
    Switzerland 1.00% 4.58%
    United Kingdom 0.74% 3.34%
    Japan -0.48% -0.22%
    AC Far East ex-Japan 0.70% 10.68%
    Hong Kong 1.82% 12.40%
    Korea -0.37% 4.58%
    Malaysia 0.23% 4.57%
    Singapore 0.19% 7.73%
    Taiwan 2.45% 15.64%
    Thailand -0.15% 23.78%
    EM Latin America 1.24% 12.24%
    Brazil 1.99% 17.19%
    Mexico 1.01% 6.83%
    Argentina -1.19% 15.03%
    EM (Emerging Markets) 0.82% 10.40%
    Hungary 0.85% -14.78%
    India 1.38% 26.32%
    Israel 2.55% 21.30%
    Russia 2.13% -9.82%
    Turkey 2.50% 17.99%
    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 -1.26% 4.46%
    Europe    
    Denmark -1.12% 2.95%
    France -1.16% 4.19%
    Germany -1.11% 2.73%
    Italy -0.94% 6.79%
    Spain -0.79% 8.16%
    Sweden -0.98% -0.15%
    United Kingdom -1.05% 6.87%
    Japan -1.67% 2.98%
    Emerging Markets 0.05% 9.50%
    Argentina -1.45% 8.15%
    Brazil 0.62% 10.07%
    Russia 0.67% 1.23%
    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 104.095 1.67% -0.97%
    Euro 1.32321 1.13% 3.98%
    British pound 1.65711 0.69% -0.05%
    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.