AdvisorShares Weekly Market Review
Highlights of the Prior week
For the week of July 29 – August 2
The major stock indexes were up for the week and for the month of July. In fact, both the S&P 500 and the Dow Jones Industrial Average made new highs, while the best performing index of the week, the Nasdaq Composite, reached its highest level in 12 years. Plenty of good economic news was released around the middle of the week. On Wednesday morning, the market rallied after the Commerce Department’s advanced estimate of second quarter GDP growth came in at a higher than expected 1.7% annualized rate. The ISM manufacturing index increased to 55.4 for July, or the highest level in two years, while the Markit PMI increased to 53.7. Although ADP estimates showed solid job growth for June and weekly jobless claims declined more than anticipated, Friday’s official number for payroll growth from the Labor Department came in at a lower than expected 162,000 jobs causing the market to dip slightly. The unemployment rate actually fell to 7.4% from 7.6% but this was mainly due to discouraged workers dropping out of the labor force. Even though the Fed downgraded its outlook for US GDP growth from “moderate” to “modest” this week, investors reacted favorable to the Fed’s two day meeting because they believe that the Fed will remain cautious and hold back on slowing down its asset purchases of around $85 billion per month. Earnings season is almost over and two-thirds of S&P 500 companies have beaten second quarter estimates, according to Thomson Reuters’ data.
US Treasury bonds had a very volatile trading week as bond investors reacted to economic news and statements from the Federal Reserve. There were two brief rallies during the week, after Fed Chairman Bernanke’s comments and after the Friday’s disappointing Labor Department jobs numbers, but ultimately long-term Treasury yields ended the week slightly higher. Treasury inflation protected securities had a better week than normal bonds due to rising oil prices and statements from the Fed that it regards persistently low inflation as a threat to economic growth. Prices for high yield corporate bonds fell slightly for the week, following several weeks of good performance. Trading in emerging market debt was very limited. Global investors are continuing to exit emerging market debt funds, but the overall pace of withdrawals was slower than in previous weeks.
Sources:*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)
Past performance is not indicative of future results.