Morningstar Market X-Ray: Stocks Break Higher
Despite a Friday drop, stocks continue to advance for the week as government plan details emerge.
Market Update
U.S. equity markets continued to rally this week as additional details about a new government co-investment plan involving the private sector were introduced. Bonds were flat on limited news and commodities continued to rally on slivers of economic improvement and some emerging concern about long-term inflation.
The Morningstar US Market Index rose significantly this week on news that the government is prepared to co-invest with private investment firms in toxic bank assets. The government will invest taxpayer equity alongside private equity and will also provide financing. Once those assets are removed, banks should be free to lend in a normal manner to businesses and consumers. This capital markets' capacity is critical to helping prime the pump to get the economy started again. Morningstar's sector index family highlights financial services, industrial materials, media, and business services as possible major beneficiaries of this new plan.
The Morningstar Core Bond Index was down ever so slightly this week as investors took a breather from worrying about Treasury supply and corporate financial distress. Corporate bonds were fairly stable and the yield on the Morningstar Corporate Bond Index remains just over 7% for this investment-grade index.
Commodity prices rose this week, continuing a rally that started in late February. Energy commodities continued to rise on improved economic outlooks and orderly supply control. Natural gas was the exception as it continued its slide this quarter; this commodity is now down about 30% for the year as the heating season in the United States comes to an end. Other commodities were up modestly across the board as investors contemplate long-term inflation expectations relative to recent fiscal policy actions.
| Bond Index One-Week Returns | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | -0.19 | 3.34 | 3.64 |
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| US Government Bond | -0.33 | 1.94 | 5.07 |
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| Corporate Bond | -0.33 | 7.10 | 5.63 |
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| Mortgage Bond | 0.02 | 2.87 | 1.52 |
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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 | 1.17 | -1.13 |
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| Long/Flat Commodity | -0.10 | -0.32 |
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| Long/Short Commodity | 0.30 | -1.62 |
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