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 January 23, 2015

Stocks move back into positive territory for the month

Stocks broke a string of three weekly declines and ended solidly higher, but positive news from overseas appeared to drive much of the gains. After being closed on Monday for the Martin Luther King, Jr. holiday, markets gathered momentum throughout most of the week. Declines in materials and telecommunications stocks weighed on the large-cap Standard & Poor's 500 Index and Dow Jones Industrial Average late Friday, however. The technology-heavy Nasdaq Composite ended the week on a strong note, helping it outperform the other benchmarks. The small-cap Russell 2000 Index lagged and remained firmly in negative territory for the year to date. Despite their underperformance against larger-cap companies in 2014, small-caps could continue to underperform, as valuations for the asset class remain near historical highs, says Small-Cap Stock Fund Manager Greg McCrickard.

ECB's QE plans drive shift in sentiment...

Even as earnings reporting season was in full swing, investor sentiment appeared to be driven in large part by macroeconomic concerns, and not even domestic ones. Reports that the European Central Bank (ECB) might announce a large quantitative easing (QE) program—buying long-term bonds in order to lower borrowing costs and spur growth and inflation—seemed to foster improved sentiment early in the week. U.S. and other global markets rallied on Thursday, when the ECB announced a program that was, in fact, much larger than what many investors had anticipated. T. Rowe Price's London-based sovereign credit analysts note that while the size of the program is roughly in line with the Fed's recent QE efforts, it should have a larger effect on the European bond market given the smaller amount of bonds available.

...but also drives up the dollar, threatening overseas profits for U.S. multinationals

T. Rowe Price analysts also expect the program to have a significant effect on the value of the euro relative to the U.S. dollar. Indeed, following the announcement, the dollar reached its highest level against a basket of other currencies since late 2003. While the strong dollar has some positive effects for the U.S. economy, it also threatens the profits of U.S. businesses earning revenues overseas.

Earnings down for financials sector, but individual opportunities remain

Threats to overseas revenues and declining oil prices have already weighed considerably on earnings expectations. Analytical and database firm FactSet now estimates that overall earnings for the S&P 500 will grow by only 0.25% in the fourth quarter of 2014. Profit expectations have declined significantly for financial firms, along with energy companies. Some better-than-expected bank earnings reported Thursday helped fuel the market's rally, however.

U.S. Stocks1
Index2 Friday's Close Week's Change % Change
Year-to-Date
DJIA 17,672.60 161.03 -0.84%
S&P 500 2051.82 32.40 -0.34%
NASDAQ Composite 4757.88 123.50 0.46%
S&P MidCap 400 1456.27 25.30 0.26%
Russell 2000 1189.90 14.03 -1.23%
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 January 23, 2015

ECB announces purchases of sovereign debt

U.S. Treasury yields finished the holiday-shortened week close to unchanged. The yield on the 10-year U.S. Treasury note rose early in the week but reversed course after the European Central Bank (ECB) announced a more forceful quantitative easing program on Thursday. Beginning in March, the ECB will expand its asset purchases to include eurozone sovereign debt, buying €60 billion (about $67 billion) per month of bonds through at least September 2016 to inject a larger-than-expected total of more than €1 trillion into the eurozone economy. Eurozone government bonds rallied to record-low yields after the ECB announcement, with 10-year German sovereign debt yielding 0.45% on Thursday.

Canada surprises with a rate cut

North of the border, the Bank of Canada surprised markets on Wednesday by cutting its benchmark overnight lending rate by 0.25 percentage points to 0.75%. The Canadian central bank said that it made the change, its first rate cut since April 2009, because falling oil prices will weigh on the country's growth and inflation.

Uptick in geopolitical worries in emerging markets

Emerging markets bonds overall were little changed for the week despite an escalation in the conflict between Russia and Ukraine as well as turmoil in the Middle East after the prime minister and president of Yemen resigned. The death of Saudi Arabia's King Abdullah triggered some uncertainty about the country's oil production policy going forward. Ukrainian debt continues to struggle, although some concerns have eased amid speculation that the country will be able to extend its bond maturities. In Latin America, Brazil raised its benchmark lending rate by 0.50 percentage points to 12.25% in an effort to contain above-target inflation.

Light issuance of investment-grade corporate bonds

Investment-grade corporate debt fell, although longer-maturity bonds performed better than short-term issues. Debt issued by U.S. financial companies turned in a strong performance as the supply of new bonds from the industry appeared to be tapering off. The overall new issue calendar was lighter than usual, which helped provide some support for investment-grade corporates in the secondary market.

U.S. Treasury Yields1
Maturity January 23, 2015 January 16, 2015
2-Year 0.49% 0.48%
10-Year 1.80% 1.83%
30-Year 2.38% 2.45%

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, January 23, 2015.

Week Ended January 23, 2015

International Stocks

Foreign stock markets closed higher for the week ending January 23, 2015 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 2.64%.

 
Region/Country Week's Return % Change Year-to-Date
EAFE 2.64% 0.75%
Europe ex-U.K. 2.60% 0.79%
Denmark 2.05% 0.86%
France 3.61% 1.05%
Germany 2.57% 1.16%
Italy 3.93% -0.04%
Netherlands 2.82% -0.17%
Spain 3.39% -4.86%
Sweden 3.28% -0.47%
Switzerland 0.47% 2.77%
United Kingdom 3.60% 0.29%
Japan 2.77% 1.53%
AC Far East ex-Japan 3.05% 3.65%
Hong Kong 1.97% 4.32%
Korea 2.53% 3.66%
Malaysia 2.15% -0.50%
Singapore 1.73% -1.21%
Taiwan 5.37% 3.35%
Thailand 4.70% 4.97%
EM Latin America 2.21% -0.09%
Brazil 1.33% 0.79%
Mexico 2.95% 0.17%
Argentina -0.59% -2.04%
EM (Emerging Markets) 3.50% 3.65%
Hungary 7.78% -4.65%
India 4.52% 9.50%
Israel -1.18% -0.78%
Russia 6.96% 11.85%
Turkey 3.61% 5.57%

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 -0.99%.

 
Region/Country Week's Return % Change Year-to-Date
Developed Markets -0.99% -1.76%
Europe    
Denmark -0.63% -4.04%
France -1.56% -4.94%
Germany -1.59% -5.46%
Italy -0.61% -4.72%
Spain -0.69% -5.10%
Sweden -0.97% -3.89%
United Kingdom 0.49% 0.51%
Japan -1.04% 1.75%
Emerging Markets 0.89% 6.83%
Argentina 0.72% 22.71%
Brazil 1.19% 11.16%
Russia -0.34% -7.64%

International Currency Markets

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

 
Currency Close
(01/23/2015)
Week's Return
(U.S. $)
% Change
Year-to-Date (U.S. $)
Japanese yen 117.825 0.17% -1.76%
Euro 1.1251 2.16% 7.03%
British pound 1.50261 0.59% 3.64%

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.