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Posted by on Oct 10, 2013 in Market Insight

AdvisorShares Weekly Market Review – Week Ending 10/4/13

AdvisorShares Weekly Market Review – Week Ending 10/4/13

Highlights of the Prior week

For the week of September 30 – October 4

Stock Markets

Returns for the major market indexes were mixed last week.  While the Nasdaq increased over the course of the week, the Dow Jones Industrial Average fell and the market-weighted S&P 500 was flat.  Small cap indexes continue to outperform large cap ones, in-fact the Russell 2000 reached a new all-time high on Tuesday.  Tuesday was actually the day when the partial shut-down of the US government begun, after the Congress failed to pass a budget to fund discretionary spending.  However, markets didn’t seem to react negatively to the much expected shut down of the Federal Government.  The bigger worry among investors is that Congress will fail to raise the debt ceiling, which caused the S&P to decline by 1.4% on Thursday morning. Markets seemed to be reassured before trading closed on Thursday though, when news outlets reported that House Speak Boehner had told colleagues that he won’t allow the US to default.  The economic data points released last week gave mixed signals about the health of the economy.  While the ISM purchasing managers’ index for manufacturing rose to 56.2 (fourth quarterly increase in a row), the ISM services PMI number fell to 54.4.  The Chicago PMI number rose to 55.7, while the final Markit PMI number dropped to 52.8.  According to the private firm ADP 166,000 jobs were added in the last month.  Finally, data out of China showed a smaller than expected manufacturing expansion in September and data out of the US showed car sales dropping to an annualized rate of 15.3 million for the same month.

Bond Markets

Fears about the debt ceiling finally seemed to have some effect on the bond markets.  Yields on short-term Treasuries maturing at the end of October rose significantly, although from a low level.  High yield debt continued to perform well despite weak performance in the equity markets (returns for the two asset classes are usually correlated).  Inflows into emerging market debt funds have slowed down from previous weeks.  In terms of sovereign debt credit ratings, S&P became the last of the three major credit rating agencies to boost the Philippines to investment grade.

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*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
*Municipal and high yield rates are from Barclays Capital

 Past performance is not indicative of future results.