AdvisorShares Weekly Market Review
Highlights of the Prior week
For the week of July 1 – July 5
Stocks moved higher but volume was notably low over the holiday shortened trading week. This week for a change, positive economic data, not speculation about the Federal Reserve’s tapering of Quantitative Easing drove the market in the US. Markets may have gone higher if it wasn’t for the turmoil in Egypt, where after 14 million Egyptians protested against the rule of Mohammed Morsi, the military intervened to push him out of power. Even though Egypt is no longer a net exporter of oil, the news helped send oil prices to their highest levels in a year on Wednesday. Egypt plays a large role in the Arab world and much of the regions oil is shipped through Egypt’s Suez Canal. However, the price of oil was more than offset by the good economic news, including a Labor Department jobs report showing a greater than expected 195,000 jobs created in June and an upwards revision of previous months job gains. The unemployment rate remained unchanged at 7.6% though as the job growth was matched by an increasing labor force. Although employment in the manufacturing sector has been declining for the past few months, the ISM manufacturing indicator increased to 50.9, while the ISM services index fell to 52.2. Also in the US, light vehicle sales hit a post-financial crisis record and the trade deficit widened to $45billion for month as US based companies are finding it harder to export as more countries falter economically.
Last Friday after the good job numbers were released, US Treasury yields hit their highest levels for almost 2 years. Sustained job growth is seen as giving the Fed a green light to begin tapering. Overall there were low volumes in the municipal and high yield corporate markets as the week was cut short by the July 4th holiday. Internationally, the big stories affecting the bond markets were the military takeover in Egypt and spike in Portuguese sovereign bond yields as the coalition government there came close to collapse. While the yields in Spain and Italy did seem to tick up with the news out of Portugal, the moves have been relatively mooted when compared to earlier panic induced bond sells offs in the Eurozone periphery. This is proof that investors are taking the ECB president Mario Draghi seriously, when he says that he is intent of keeping interest rates low for an extended time period.
*Indexes are from Reuters and Yahoo! Finance 4pm closing data
*Gold prices are from EcoWin and J.P. Morgan Asset Management
*Treasury rates are from Bloomberg.com
*Municipal and high yield rates are from Barclays Capital
*30 year mortgage rate comes from the Mortgage Bankers Association (MBA)
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