Market X-Ray: Rally Rolls for Another Week
The stock market gave investors reason for cheer, but spreads still show the credit crisis is alive and well.
Market Update
Despite mixed economic news, U.S. markets rallied this week, giving equity, bond, and commodity investors something to cheer about. Consumer confidence held steady, pending home sales rose, and March auto sales showed an uptick over February. Damping this enthusiasm at the end of the week was the U.S. unemployment rate of 8.5%, a 25-year high.
The Morningstar US Market Index tacked on another 4% this week on top of last week's 6% gain. Enthusiasm for companies with proven earnings growth continued this week, as Morningstar Growth Index, up 4%, outperformed the Morningstar Value Index, up 3%. This outperformance is in addition to the growth index's heady performance of the first quarter, which topped value by 15 percentage points. Companies such as Qualcomm (QCOM) and Apple (AAPL), up 5% and 8%, respectively, are both generating top- and bottom-line growth despite the economy in the doldrums.
The Morningstar Core Bond Index was up 0.2% as each of the bond sectors were in positive territory. The Morningstar Corporate Bond Index rallied the most, gaining 0.45%, pushing its yield below 7%. Nonetheless, the spread between Treasuries and corporate yields stands at 500 basis points. Given that the historical average for this spread is around 150 to 200 basis points, the credit crisis is still alive and well.
Commodities were down slightly, as the Morningstar Long-Only Commodity Index fell 0.3%. Farm-based commodities, such as wheat, soybeans, and corn, were generally up. Farmers can adjust the crops that they plant this spring, which can help support these farm-based products' prices. Energy-based commodities were mostly down, with natural gas showing the biggest weekly loss of 6%.
| Bond Index One-Week Returns | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | 0.23 | 3.28 | 3.75 |
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| US Government Bond | 0.18 | 1.92 | 5.06 |
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| Corporate Bond | 0.45 | 6.92 | 5.50 |
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| Mortgage Bond | 0.18 | 2.80 | 1.60 |
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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 | -0.27 | -1.40 |
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| Long/Flat Commodity | -0.19 | -0.50 |
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| Long/Short Commodity | -1.40 | -2.99 |
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For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com