Morningstar Market X-Ray: Stocks Up and Down Over Fed
Investors weigh the impact of new federal spending tied to the Fed's bold course of action.
Market Update
U.S. equity markets finished the week close to where they started, after being up big by midweek, as investors weighed the impact of new federal spending. The U.S. government announced a $1.2 trillion stimulus package designed to lower interest rates and stimulate new consumer and business investment. Bonds were up in anticipation of additional federal spending to buy up supply to help lower interest rates. Commodities were up nearly across the board as investors positioned for possible inflation down the road.
The Morningstar US Market Index ended up a modest amount after a wild week. Value beat growth this week as several oil firms such as Chevron (CVX), ExxonMobil (XOM), and Occidental Petroleum (OXY) rose in tandem with oil prices. Growth stocks that had a good week include Oracle (ORCL), Microsoft (MSFT), Intel (INTC), and Apple (AAPL) as investors took a fresh look at the sector after IBM (IBM) announced a deal for Sun Microsystems . Financial-services firms continued to find support this week as indicated by stock price increases at J.P. Morgan (JPM) and Wells Fargo (WFC).
The Morningstar Core Bond Index was up as both government and corporate bonds rose on news of additional government purchases. The U.S. is preparing to purchase $300 billion in Treasury bonds to offset supply from recent stimulus package funding efforts. The bond-buying effort should help keep interest rates low so investment projects remain attractive to businesses and consumers. Corporate bonds rose as the Treasury benchmark that underlies corporate bond prices increased. The largest weighted increases in the Morningstar Corporate Bond Index came, however, from the financial-services sector as investors continue to get comfortable with the credit risk present in those securities.
The Morningstar Long-Only Commodity Index rose considerably this week as every contract in the index was up on expectations of inflation that could likely be a medium-term consequence of recent fiscal and monetary policy decisions.
| Bond Index One-Week Returns | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | 1.02 | 3.27 | 3.71 |
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| US Government Bond | 1.28 | 1.88 | 5.10 |
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| Corporate Bond | 1.34 | 7.04 | 5.67 |
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| Mortgage Bond | 0.60 | 2.77 | 1.47 |
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| Commodity Index One-Week Returns | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | 6.24 | -2.27 |
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| Long/Flat Commodity | 0.20 | -0.22 |
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| Long/Short Commodity | -2.38 | -1.92 |
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