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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 September 26, 2014

    S&P 500 surrenders previous week's gain

    Stocks retreated for the week as investors appeared to react to new geopolitical worries while growing more concerned about whether equity valuations will be able to withstand an eventual increase in short-term interest rates. The Dow Jones Industrial Average fared somewhat better than the Standard & Poor's 500 Index, which surrendered all of the previous week's gain. The technology-heavy Nasdaq Composite Index performed poorly. One factor favoring the narrowly focused Dow over the other two benchmarks was its exclusion of Apple, which fell sharply following news of problems with its new iPhone 6 and iOS 8 mobile operating system. The smaller-cap benchmarks performed worst, however.

    Several factors suspected behind Thursday's sell-off

    The major damage to stock prices occurred on Thursday, when the S&P 500 suffered its largest daily pullback since July 31. The decline in heavily weighted Apple was partly to blame, but the catalyst for the broader sell-off was unclear. Several sources blamed reports that Russian authorities might seize Western assets in retaliation for sanctions, and the escalation of fighting in Syria may have also played a role. Some pointed as well to a headline-grabbing 18.2% decline in durable goods order in August. The pullback reflected a swing in civilian aircraft orders, however-orders had surged 22.5% in July-and was only slightly greater than most analysts expected.

    U.S. manufacturing sector remains robust

    Investors' reaction to the news might have been exacerbated by the recent rise in the U.S. dollar versus other currencies, which some worry will weigh on the competitiveness of American firms by making U.S. goods more expensive overseas. U.S. manufacturing signals have remained strong for the time being, however; data compiled by T. Rowe Price chief economist Alan Levenson show manufacturing activity expanding at a faster clip in the U.S. than in any other major economy. T. Rowe Price managers are carefully watching the rebound in U.S. manufacturing, which has been boosted not only by a cheap dollar but also by the boom in cheap and reliable domestic energy production.

    Low level of firings raises interest rate worries

    Indeed, generally good news on the economy may have played a role in dampening investor sentiment by furthering worries about a change in Federal Reserve policy. Thursday also brought word that weekly jobless claims stayed below the 300,000 level. The number indicated ongoing healing in the labor market, which may encourage policymakers to act sooner rather than later to raise short-term interest rates. Fed officials left their interest rate forecast largely unchanged at their September meeting, raising the possibility that the central bank will set a timetable for raising rates at the Fed's October 28-29 monetary policy meeting.

    Upward revision to growth estimates may help spark rally to end week

    Stocks regained some momentum at the end of the week. The Commerce Department announced Friday morning that the economy had grown at its fastest pace since the end of 2011, which may have been one factor in helping stocks recover much of the previous day's losses. Briefing.com reported that trading volume was light, however.

    U.S. Stocks1
    Index2 Friday's Close Week's Change % Change
    Year-to-Date
    DJIA 17113.15 -166.59 3.24%
    S&P 500 1982.85 -27.55 7.28%
    NASDAQ Composite 4512.19 -67.60 8.04%
    S&P MidCap 400 1385.55 -34.75 3.20%
    Russell 2000 1118.40 -29.09 -3.89%
    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 September 26, 2014

    Treasury yields decline amid geopolitical turbulence

    Demand for intermediate- and long- term Treasuries increased, driving their yields lower, as geopolitical tensions overshadowed continued signs of economic strength in the U.S. The Commerce Department revised its estimate of annualized second-quarter gross domestic product growth to 4.6% from 4.2%. Yields on very short-term Treasury bills-those maturing in three months or less-were 0% or slightly negative early in the week. This unusual development could be the result of the Federal Reserve capping the size of its reverse repo lending facility, which is an alternative for institutional investors that have funds to lend out for very short periods of time, and falling net issuance of Treasury bills.

    Markets still hopeful for broad-based QE from the ECB

    Yields on the government bonds of core eurozone countries also declined after European Central Bank President Mario Draghi reiterated that officials could deploy additional unconventional policy measures if data indicate that inflation will stay below the ECB's target for an extended period. Markets interpreted the comments as a sign that the ECB could still implement a broad-based quantitative easing program involving purchases of government debt.

    Demand for new investment-grade debt remains strong

    New issuance of investment-grade corporate bonds continued to be robust, although investors favored new debt with solid fundamentals, limited supply, and short maturities. Credit spreads moved wider in the secondary market as investors preferred to put money to work in newly issued bonds. Credit spreads measure the additional yield that investors demand as compensation for holding a bond with credit risk versus a similar-maturity Treasury security. High yield bonds weakened in parallel with the equities market.

    Positive results from municipal debt

    Municipal bonds posted solid results as strong demand easily absorbed the additional supply from two large new deals. California sold more than $2 billion of new general obligation debt and New York City issued over $2 billion of bonds backed by sales tax revenue.

    U.S. Treasury Yields1
    Maturity September 26, 2014 September 19, 2014
    2-Year 0.58% 0.56%
    10-Year 2.53% 2.58%
    30-Year 3.22% 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, September 26, 2014.

    Week Ended September 26, 2014

    International Stocks

    Foreign stock markets closed lower for the week ending September 26, 2014 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), losing -2.18%.

     
    Region/Country Week's Return % Change Year-to-Date
    EAFE -2.18% -0.45%
    Europe ex-U.K. -2.71% -1.41%
    Denmark -2.08% 17.01%
    France -2.60% -3.26%
    Germany -4.19% -8.79%
    Italy -1.26% 5.09%
    Netherlands -2.66% -3.05%
    Spain -2.18% 4.97%
    Sweden -3.31% -4.37%
    Switzerland -1.96% 2.85%
    United Kingdom -3.15% -0.56%
    Japan 0.47% -0.51%
    AC Far East ex-Japan -2.13% 5.18%
    Hong Kong -1.90% 5.67%
    Korea -1.83% -1.72%
    Malaysia -0.94% 0.15%
    Singapore -0.56% 4.27%
    Taiwan -3.32% 9.20%
    Thailand 0.34% 26.79%
    EM Latin America -3.57% 5.11%
    Brazil -3.49% 7.79%
    Mexico -3.60% 2.97%
    Argentina 0.65% 31.02%
    EM (Emerging Markets) -2.82% 4.63%
    Hungary -7.24% -18.36%
    India -2.24% 25.31%
    Israel -1.17% 18.63%
    Russia -1.59% -17.64%
    Turkey -4.10% 7.10%

    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 -0.29%.

     
    Region/Country Week's Return % Change Year-to-Date
    Developed Markets -0.29% 0.68%
    Europe    
    Denmark -0.51% -0.42%
    France -0.50% 0.31%
    Germany -0.60% -1.13%
    Italy -1.19% 3.67%
    Spain -1.05% 4.61%
    Sweden -0.85% -4.11%
    United Kingdom 0.23% 5.18%
    Japan 0.22% -1.60%
    Emerging Markets 0.31% 8.17%
    Argentina 1.10% 19.49%
    Brazil -0.96% 7.99%
    Russia 0.65% 0.89%

    International Currency Markets

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

     
    Currency Close
    (9/26/2014)
    Week's Return
    (U.S. $)
    % Change
    Year-to-Date (U.S. $)
    Japanese yen 109.210 0.21% 3.76%
    Euro 1.26961 1.13% 7.86%
    British pound 1.62441 0.41% 1.92%

    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.