Weekend Market X-Ray: Less Stress After Tests
The Morningstar US Market Index ended the week up almost 6% as investors embraced positive bank stress test news.
Market Update
U.S. equity markets ended this week up strongly. Investors kicked off the week with strong buying on news the U.S. banking system may need less capital than feared a few months ago. Positive news around existing home sales buoyed homebuilders and added support to the emerging thesis that the U.S. recession may be nearing a bottom. Government bond yields continued to rise while corporate bond yields again moved lower. Commodities rallied, paced by oil.
The Morningstar US Market Index ended the week up almost 6% as investors embraced positive bank stress test news and emerging signs of economic stabilization. The Morningstar Value Index crushed the Growth Index by a 3-to-1 ratio on strong stock moves for several financial services firms such as Bank of America (BAC), Prudential (PRU), Citigroup (C), and Capital One (COF), reversing last week's style performance. We can better observe market behavior between value and growth due to the Morningstar core category. This structure is designed to communicate market activity with greater clarity to help investors execute their equity strategies with greater precision.
The Morningstar Core Bond Index was flat again this week as the corporate and government bond relationship remained decoupled. The Morningstar Corporate Bond Index rose nearly 1% as demand for relatively high-yielding bonds pushed bond prices up. Issuers with 20%-42% price gains this week include AIG, Genworth, Capital One, and Southern Copper. Issuers seeing 3%-5% bond price decreases include Duke Energy, ConocoPhillips, XTO Energy, Wells Fargo, Wal-Mart, and 3M.
The Morningstar Long-Only Commodity Index was up nearly 5% this week as oil rallied 10% on supply moderation and expected increases in industrial usage. Latte-drinking investors will be disappointed to see that coffee and sugar contracts surged about 7% on average this week.
| Bond Index One-Week Returns (Data as of 05-08-09) | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | -0.01 | 3.32 | 4.09 |
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| US Government Bond | -0.56 | 2.19 | 4.87 |
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| Corporate Bond | 1.03 | 6.14 | 5.48 |
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| Mortgage Bond | 0.00 | 2.99 | 2.64 |
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| Commodity Index One-Week Returns (Data as of 05-07-09) | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | 7.86 | 5.03 |
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| Long/Flat Commodity | 0.13 | -0.45 |
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| Long/Short Commodity | -2.83 | -6.94 |
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For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com