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WeeklyCommentary February19,2013
TheMarkets
Stocks delivered mixed performance last week. The Dow Jones Industrials and NASDAQ Indices moved lower while the Standard & Poors 500 and Russell 2000 Indices moved higher for the week. Stocks were helped by positive economic news in the United States, including modestly positive retail sales for January, improved consumer sentiment, and a decline in initial jobless claims. However, these positives were offset to some extent by concerns about weakness overseas. Germany reported that its economy contracted during the fourth quarter of 2012. Its the countrys worst economic performance since 2009. Overall, the major stock indices remain in positive territory for the year. Theyve been buoyed, in part, by better than expected fourth quarter earnings. On January 1, 2013, analysts expected profitability of companies in the S&P 500 Index would increase by about 2.9 percent year-to-year. As 2012 fourth quarters earnings season headed toward the finish line last week, that estimate had almost doubled to 5.6 percent. About 70 percent of companies have exceeded analysts expectations so far. On average, over the long term, about 62 percent of companies beat expectations. The yield on benchmark 10-year Treasury bonds continued to hover around 2 percent during the week. Reports of weaker than expected economic growth in Europe during the last quarter of 2012 may have increased demand for Treasuries. When demand increases, prices often go up and yields go down. Bond yields also have been affected by the Federal Reserves quantitative easing program. The Fed has been buying Treasury bonds in an effort to help support the economy. In general, these purchases are believed to be keeping bond yields lower than they might be otherwise. Quantitative easing will not continue indefinitely which may be the reason the Financial Industry Regulatory Authority issued a statement last week that said, Many economists believe that interest rates are not likely to get much lower and will eventually rise. If that is true, then outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops as interest rates rise along the way.
Dataasof2/15/13 Standard & Poor's 500 (Domestic Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index 1Week 0.1% 2.0 -3.4 -1.4 0.4 YTD 6.6% N/A -4.8 0.1 5.0 1Year 13.1% 1.9 -7.0 -3.8 18.2 3Year 11.6% 3.7 13.7 1.2 22.5 5Year 2.4% 3.8 12.1 -7.0 7.6 10Year 6.0% 4.0 16.6 1.5 12.7
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barrons, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
WeeklyFocusThinkAboutIt
The greatest pleasure in life is doing what people say you cannot do. --Walter Bagehot, British economist and journalist
Bestregards,
PattyLoris,MBA,CFP LPLFinancialAdvisor
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