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 March 20, 2015

Stocks break streak of weekly losses; Nasdaq reaches 15-year high
Stocks broke a string of three weekly losses and recorded strong gains for the week as investors welcomed favorable comments from the Federal Reserve and at least a temporary reversal in the rise of the U.S. dollar. The Nasdaq Composite Index outperformed the large-cap benchmarks and reached a new 15-year high on Friday, thanks in part to continued strong performance from biotech stocks. Mid-cap stocks were also particularly strong, helping the S&P MidCap 400 Index reach an all-time intraday high on Friday.

Disappointing economic data boost interest rate sentiment
Concerns about rising interest rates have driven a significant amount of volatility in recent weeks, but stocks rose at the start of the week as tepid economic data suggested that policymakers would signal no change in policy when they met at midweek. On Monday, the Fed reported that manufacturing output had declined for the third consecutive month-and revised previous data lower-due mainly to reduced mining and oil and gas drilling. The figures were further proof that the economy had slowed considerably from its rapid expansion in the middle of 2014, even as job gains advanced at a steady clip.

Fed no longer "patient" but still cautious
The outcome of the Fed's meeting on Wednesday indicated that policymakers do not believe that the economic expansion is in serious jeopardy but that they were growing more cautious. While announcing no change in interest rates, as expected, the Fed dropped reference to remaining "patient" in eventually deciding to guide rates higher. In a later press conference, Fed Chair Janet Yellen clarified that removing the word "patient" from the statement "doesn't mean we are going to be impatient." Fed officials did lower their median expectation for rates at the end of the year, however, due to somewhat lower growth projections. Stock prices rose dramatically on the news, as investors looked forward to a continued favorable rate environment for equities relative to bonds. The Fed's more subdued outlook also took some wind out the U.S. dollar, whose rise is weighing on the profits of U.S. multinationals.

Housing starts plunge, but weather clearly to blame
The National Association of Homebuilders reported on Monday that its gauge of builder confidence had declined once more, and news on Tuesday that housing starts had plunged in February seemed at first blush to confirm a reversal in the housing sector. T. Rowe Price Chief U.S. Economist Alan Levenson notes that the underlying data point to severe weather as the culprit. Even as housing starts fell quite sharply in the snowed-under Midwest and Northeast, the number of newly issued permits rose, suggesting a rebound in the months ahead. Generally, Mr. Levenson believes that the economic slowdown in the first quarter is related to severe winter weather, much like last year, and he expects growth to be more favorable for the balance of the year.

Oil prices rally, but industry insiders not optimistic
Sector-level factors also boosted stock prices. Biotech shares benefited from merger activity and drug testing results, and a rise in energy shares and oil prices helped markets take another leg upward at the start of trading on Friday. Speaking with Bloomberg, however, T. Rowe Price energy analyst Christian O'Neill recently issued a cautionary note about a significant or rapid rebound in oil prices and said attempting to time a turnaround might be risky. "Many [industry] executives are expecting a longer downturn," he told Bloomberg.

U.S. Stocks1
Index2 Friday's Close Week's Change % Change
Year-to-Date
DJIA 18,127.72 378.41 1.71%
S&P 500 2108.07 54.67 2.39%
NASDAQ Composite 5026.42 154.66 6.13%
S&P MidCap 400 1540.89 47.98 6.09%
Russell 2000 1267.12 33.93 5.18%
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 March 20, 2015

Treasuries rally after Fed statement reassures on pace of tightening
The Federal Reserve removed the word "patient" from its post-policy meeting statement about the timing of its first interest rate hike, paving the way for it to raise rates. However, the central bank made clear that it is in no rush to tighten monetary policy. Treasury debt rallied strongly, pushing the yield on the 10-year Treasury note well below 2.00%. (Bond prices and yields move in opposite directions.) T. Rowe Price Chief U.S. Economist Alan Levenson notes that the Fed's newly released projections for economic growth and inflation were both lower than the central bank's forecasts from December, likely justifying a slower trajectory of rate increases.

Recent heavy issuance weighs on investment-grade corporate debt
Investment-grade corporate bond prices showed signs of weakness at the beginning of the week as the market struggled to digest the recent flood of new supply. On Tuesday, investors began to buy investment-grade corporates more aggressively amid anticipation of slower-than-typical issuance for the balance of the week. Investment-grade corporates rallied along with Treasuries following the dovish Fed statement on Wednesday to finish the week with positive returns.

High yield corporate bonds lag amid falling oil prices
The early-week drop in oil prices contributed to a sluggish market for high yield corporate debt. Bonds from oil-related issuers account for a large proportion of most high yield indexes, so their price weakness weighed on the broad asset class. In addition, the $10 billion in new high yield bonds issued by Valeant Pharmaceuticals International at the end of last week to finance its bid for Salix Pharmaceuticals likely contributed to the softness in the market. The Fed's statement brought some cheer to the high yield market later in the week, triggering a rally that helped offset some of the weakness.

Positive week for emerging markets bonds
Emerging markets debt generated modestly positive returns. Short-maturity Venezuelan obligations received support from the country's move to repay its debt due in 2015, although longer-term Venezuelan bonds struggled. Corporate bonds issued by emerging markets oil producers, particularly those based in Latin America, lost ground as oil prices dropped early in the week.

U.S. Treasury Yields1
Maturity March 20, 2015 March 20, 2015
2-Year 0.58% 0.65%
10-Year 1.92% 2.12%
30-Year 2.50% 2.71%

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, March 20, 2015.

Week Ended March 20, 2015

International Stocks

Foreign stock markets closed higher for the week ending March 20, 2015 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 4.02%.

 
Region/Country Week's Return % Change Year-to-Date
EAFE 4.02% 6.89%
Europe ex-U.K. 4.40% 6.96%
Denmark 5.08% 11.99%
France 4.04% 6.26%
Germany 3.78% 9.64%
Italy 4.66% 7.43%
Netherlands 3.28% 7.34%
Spain 6.32% -1.42%
Sweden 3.50% 6.97%
Switzerland 5.48% 7.61%
United Kingdom 5.54% 3.20%
Japan 2.18% 11.99%
AC Far East ex-Japan 2.38% 3.46%
Hong Kong 1.37% 3.15%
Korea 2.90% 3.85%
Malaysia -0.04% -3.69%
Singapore 2.30% -3.77%
Taiwan 2.71% 5.87%
Thailand 1.12% 1.91%
EM Latin America 5.45% -9.01%
Brazil 7.92% -14.01%
Mexico 2.99% -0.33%
Argentina 11.32% 37.92%
EM (Emerging Markets) 3.21% 1.66%
Hungary 7.45% 10.20%
India 0.26% 6.76%
Israel 2.43% 5.92%
Russia 5.67% 17.90%
Turkey 10.54% -13.47%

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 2.37%.

 
Region/Country Week's Return % Change Year-to-Date
Developed Markets 2.37% -3.67%
Europe    
Denmark 3.17% -5.52%
France 2.79% -7.06%
Germany 3.00% -7.54%
Italy 2.13% -5.71%
Spain 2.26% -7.24%
Sweden 1.48% -6.19%
United Kingdom 3.22% -1.36%
Japan 1.78% -0.43%
Emerging Markets 1.63% 7.35%
Argentina 0.05% 36.42%
Brazil 1.75% 5.37%
Russia 1.62% -0.72%

International Currency Markets

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

 
Currency Close
(03/20/2015)
Week's Return
(U.S. $)
% Change
Year-to-Date (U.S. $)
Japanese yen 121.260 -0.77% 0.30%
Euro 1.07951 -2.59% 10.79%
British pound 1.49221 -1.15% 4.30%

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.