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 31, 2015

Stocks regain momentum
After a poor start to the week, stocks managed to reverse course and end higher. Even as second-quarter earnings remained poised for their first overall decline in nearly three years, investors were encouraged by some companies beating analyst expectations. Mid-cap stocks led smaller and larger shares, while the narrowly focused Dow Jones Industrial Average trailed and remained the sole major benchmark in negative territory for the year to date. Before turning course on Tuesday, the broad S&P 500 had lost nearly 3% over the previous five days. The index ended the week only roughly 1.4% below its all-time highs, however.

U.S. markets follow China lower...
Stocks stumbled out of the gate on Monday, as U.S. and other global markets reacted to the sharpest decline in Chinese stocks in eight years. Although Chinese shares gained some traction at midweek, they declined on Thursday and Friday and tallied their worst monthly performance since late 2009.

...but earnings season brings focus back to domestic growth
With earnings reporting season in full swing, U.S. investors appeared to shift their focus from global financial and macroeconomic concerns. Stocks rallied Tuesday as 41 of the S&P 500 companies reported earnings. According to T. Rowe Price traders, market participants were happy to see energy earnings—although down significantly—come in 20% higher than consensus estimates, while health care and consumer discretionary companies recorded solid profit growth. Another 48 S&P 500 companies reported their results on Wednesday, and stocks built on their gains as a rebound in oil prices boosted energy shares.

Investors see interest rate increase late in year
Wednesday also brought a new policy statement from the Federal Reserve, although T. Rowe Price traders note that it caused only a brief bounce in stocks. Fed officials noted recent improvements in the job market and economy, suggesting to many observers that the central bank is on track to begin raising interest rates in September. At the same time, however, policymakers noted that inflation remained well below their target level of 2%, implying that any rate increases would be modest. T. Rowe Price fixed income managers believe that too much attention has generally been paid to start date of Fed rate hikes and that the magnitude and pace of increases will be more important.

Economy growing at slower pace than in 2014
Expectations for a September hike were strengthened on Thursday, when the Commerce Department reported that the economy had actually grown slightly in the first quarter, rather than contracting, as originally estimated. The department's estimate of second-quarter growth was weaker than anticipated, however, and T. Rowe Price Chief U.S. Economist Alan Levenson sees evidence of a sluggish underlying trend. Even with the upward revision to the first quarter, he notes, data are showing the U.S. economy expanding at a slower rate in the first six months of the year than it was in the first half of 2014.

U.S. Stocks1
Index2 Friday's Close Week's Change % Change
Year-to-Date
DJIA 17690.46 121.93 -0.74%
S&P 500 2103.92 24.27 2.19%
NASDAQ Composite 5128.28 39.65 8.28%
S&P MidCap 400 1502.03 24.29 3.41%
Russell 2000 1236.91 10.03 2.67%
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 31, 2015

The Fed holds rates steady and reiterates that liftoff will be data dependent
The U.S. Treasury yield curve flattened, with increased supply and looming rate hikes causing short-term yields to rise while yields on longer-maturity bonds decreased amid lower commodities prices and easing inflation expectations. (Bond prices and yields move in opposite directions.) As was widely expected, the Federal Reserve did not increase rates at its two-day policy meeting, which ended on Wednesday. The Fed reiterated that future rate hikes will be dependent on forthcoming economic data. The Department of Commerce announced that gross domestic product expanded at a 2.3% rate in the second quarter, marking a somewhat slower-than-expected rebound from the weak first quarter.

Stabilization in commodity prices supports corporate bonds
The investment-grade corporate bond market had a positive tone for most of the week, as stabilization in commodity prices and increased demand from month-end buying provided support. Issuance was heavy at times, but the week's large new deals were met with decent investor demand. Trading in tandem with strong equity markets, high yield bonds continued their recovery from recent weakness.

Positive week for emerging markets government bonds
Dollar-denominated emerging markets sovereign debt posted marginally positive returns. Mexico's bonds led the advances as the country's central bank announced that it would hold interest rates steady but increase its actions in the currency market to support the weak peso. Brazil's central bank raised its benchmark lending rate by 0.50 percentage points but signaled that the hike will likely end its monetary tightening cycle. Emerging markets corporate bonds fell, weighed down by Brazilian corporates as the country made more arrests related to the corruption scandal at partially state-owned oil company Petrobras.

Municipal debt little changed
Amid light new issuance, municipal bonds were little changed. Late last week, a judge ruled that Chicago could not make changes to two of its pension plans that would have reduced the city's obligations to fund retirement benefits. The credit rating agencies could further downgrade the city's municipal debt as a result of the ruling.

U.S. Treasury Yields1
Maturity July 31, 2015 July 24, 2015
2-Year 0.67% 0.68%
10-Year 2.19% 2.26%
30-Year 2.91% 2.96%

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 31, 2015.

Week Ended July 24, 2015

International Stocks

Foreign stock markets closed higher for the week ending July 24, 2015 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), losiing -1.5%.

 
Region/Country Week's Return % Change Year-to-Date
EAFE -1.50% 6.98%
Europe ex-U.K. -0.85% 8.56%
Denmark 0.43% 26.75%
France -0.25% 9.78%
Germany -1.67% 5.12%
Italy -0.14% 13.59%
Netherlands -0.56% 11.46%
Spain -0.38% 1.47%
Sweden -1.03% 4.03%
Switzerland -1.19% 10.12%
United Kingdom -3.76% 1.28%
Japan -0.39% 14.21%
AC Far East ex-Japan -1.97% 0.32%
Hong Kong -0.84% 11.00%
Korea -3.80% -7.45%
Malaysia -0.54% -9.52%
Singapore -0.29% -2.76%
Taiwan -3.61% -1.21%
Thailand -5.23% -8.78%
EM Latin America -7.00% -15.10%
Brazil -9.28% -20.19%
Mexico -4.59% -6.58%
Argentina -9.78% -0.42%
EM (Emerging Markets) -3.28% -3.09%
Hungary -0.79% 29.05%
India -1.50% 3.38%
Israel -1.00% 12.26%
Russia -5.75% 20.36%
Turkey -8.10% -20.61%

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 1.01%.

 
Region/Country Week's Return % Change Year-to-Date
Developed Markets 1.01% -5.89%
Europe    
Denmark 2.14% -9.10%
France 1.85% -9.20%
Germany 1.69% -9.30%
Italy 1.57% -7.74%
Spain 1.38% -9.53%
Sweden 0.89% -7.64%
United Kingdom 0.70% -0.39%
Japan 0.44% -3.52%
Emerging Markets -0.45% 7.24%
Argentina -0.23% 31.71%
Brazil -2.58% 3.53%
Russia -0.87% 5.43%

International Currency Markets

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

 
Currency Close
(07/24/2015)
Week's Return
(U.S. $)
% Change
Year-to-Date (U.S. $)
Japanese yen 123.705 -0.21% 3.08%
Euro 1.09661 -1.03% 9.38%
British pound 1.55031 0.84% 0.57%

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.