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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 July 18, 2014

    Stocks mixed as geopolitical concerns dampen sentiment

    Most benchmarks ended the week higher as enthusiasm about better-than-expected earnings at several prominent companies offset geopolitical concerns. The focused Dow Jones Industrial Average fared best and managed to establish a new high on Wednesday. The Russell 2000 Index, which measures the stock performance of smaller companies, sank as investors reacted to news that Federal Reserve policymakers considered small-caps valuations stretched. The S&P MidCap 400 Index was roughly flat for the week.

    Ukraine and Gaza prompt biggest decline since April

    The S&P 500 Index saw its steepest decline since April on Thursday, following news that a Malaysian Airlines jet had apparently been shot down over Ukraine—a tragedy that was quickly attributed to Russian-backed separatists in the region. News later in the day of an Israeli ground invasion of the Gaza strip also contributed to selling pressure. Markets in the U.S. rebounded on Friday, however, as investors appeared to determine that both events would have a manageable impact. Better-than-expected earnings results from Google also provided a particular boost to the tech sector.

    Investors welcome bank earnings

    Banking giant Citigroup established a positive earnings tone for the week on Monday, when it announced a smaller-than-expected decline in profit growth, thanks in part to favorable trading volumes. Investors were also pleased to see a settlement with the government over bad mortgage loans.

    Valuation comments from Fed spook small-cap investors

    The turmoil among small-caps occurred Wednesday, following congressional testimony from Fed Chair Janet Yellen. The testimony was accompanied by a monetary policy report from the Fed, which stated that "valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year."

    Tech analysts see reasons for patience with valuations in the sector

    Opinions about valuations vary among T. Rowe Price managers, but analysts covering high-growth sectors, such as technology and biotechnology, generally agree that a patient approach is warranted with leading companies—even if high valuations based on current earnings make them susceptible to pullbacks. Favorably positioned firms are seizing market share from traditional competitors, which should create opportunities for durable earnings growth, in many cases.

    U.S. Stocks1
    Index2 Friday's Close Week's Change % Change
    Year-to-Date
    DJIA 17100.18 156.37 3.16%
    S&P 500 1978.22 10.65 7.03%
    NASDAQ Composite 4432.15 16.66 6.12%
    S&P MidCap 400 1412.50 1.41 5.21%
    Russell 2000 1151.31 -8.68 -1.06%
    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 18, 2014

    Longer-term Treasuries rally on safe-haven buying

    Rapidly evolving geopolitical events drove investors to safer assets, boosting the prices of intermediate- and long-term Treasuries and pushing their yields lower. The yield on the 30-year Treasury bond reached its lowest level in more than 12 months. On Wednesday, the U.S. and the European Union (EU) ratcheted up sanctions on Russia as a result of the ongoing standoff over eastern Ukraine. That situation suddenly worsened on Thursday when a civilian airliner was apparently shot down near the border between Ukraine and Russia. In the Middle East, Israel sent ground troops into the Gaza Strip as that conflict escalated.

    Geopolitics in focus for emerging markets debt

    In emerging markets, bond investors concentrated on the effects of the strengthened sanctions imposed on Russia's banking, energy, and defense sectors. As a result of the downing of the airliner, T. Rowe Price analysts expect still more sanctions from the U.S. and the EU. Aside from the geopolitical news, China reported that its gross domestic product grew at a 7.5% year-over-year rate in the second quarter, up slightly from its 7.4% first-quarter growth.

    Inflows, limited new supply support municipal bonds

    Municipal bonds posted gains as cash flowed into the market amid very limited new issuance. Puerto Rico's debt attracted bidders, allowing it to recover somewhat from a sell-off in the last few weeks after the territory enacted legislation to restructure municipal bonds issued by its public corporations.

    Solid earnings for banking sector corporate bond issuers

    The investment-grade corporate bond market focused on earnings season. Banking sector corporates benefited from solid earnings reports from J.P. Morgan Chase, Goldman Sachs, Wells Fargo, and Citigroup, all of which are major issuers of corporate debt. However, demand for corporate bonds declined toward the end of the week as geopolitical events prompted investors to shift into bonds with less credit risk.

    U.S. Treasury Yields1
    Maturity July 18, 2014 July 11, 2014
    2-Year 0.48% 0.45%
    10-Year 2.49% 2.52%
    30-Year 3.29% 3.34%

    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 18, 2014.

    Week Ended July 18, 2014

    International Stocks

    Foreign stock markets closed higher for the week ending July 18, 2014 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 0.34%.

     
    Region/Country Week's Return % Change Year-to-Date
    EAFE 0.34% 4.08%
    Europe ex-U.K. -0.04% 3.48%
    Denmark -0.16% 17.59%
    France -0.20% 2.09%
    Germany 0.01% -0.42%
    Italy -0.17% 10.46%
    Netherlands -0.85% -2.47%
    Spain -0.55% 8.07%
    Sweden 1.10% 1.05%
    Switzerland -0.07% 5.87%
    United Kingdom 0.73% 5.24%
    Japan 0.61% 0.84%
    AC Far East ex-Japan 0.47% 6.87%
    Hong Kong -0.01% 5.43%
    Korea 1.24% 3.06%
    Malaysia -0.46% 3.73%
    Singapore 0.74% 7.24%
    Taiwan -1.23% 13.39%
    Thailand 0.91% 20.92%
    EM Latin America 2.16% 11.86%
    Brazil 3.28% 16.79%
    Mexico 2.21% 5.67%
    Argentina -0.70% 44.46%
    EM (Emerging Markets) 0.67% 8.14%
    Hungary -1.06% -10.52%
    India 1.34% 21.62%
    Israel 0.31% 22.28%
    Russia -5.63% -8.67%
    Turkey 3.85% 26.89%
    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 -0.02%.

     
    Region/Country Week's Return % Change Year-to-Date
    Developed Markets -0.02% 5.84%
    Europe    
    Denmark -0.28% 3.66%
    France -0.22% 4.88%
    Germany -0.33% 3.57%
    Italy -0.07% 7.32%
    Spain 0.22% 7.90%
    Sweden -0.34% 0.14%
    United Kingdom 0.32% 7.83%
    Japan -0.01% 5.49%
    Emerging Markets -0.17% 10.00%
    Argentina -3.81% 25.65%
    Brazil 0.85% 8.88%
    Russia -1.74% 1.95%
    International Currency Markets

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

     
    Currency Close
    (July 18, 2014)
    Week's Return
    (U.S. $)
    % Change
    Year-to-Date (U.S. $)
    Japanese yen 101.395 0.09% -3.66%
    Euro 1.3511 0.66% 1.96%
    British pound 1.70671 0.20% -3.04%
    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.