Corporate Earnings Push Back Skeptics
Equity markets reacted positively to better-than-expected economic and earnings news.
Market Update
Equity markets reacted positively to better-than-expected economic and earnings news, moving substantially higher for the second week in a row.
Equity market enthusiasm started with the better-than-expected reading of the Conference Board's index of leading economic indicators and continued with stronger-than-expected corporate earnings reports from industry titans like Apple (AAPL) and AT&T (T).
The Morningstar US Market Index rose 4.4% for the week ending July 24, 2009. While returns were positive across all sizes and styles, small-cap stocks outperformed their large-cap counterparts.
Growth and value gained about the same. The successful launch of the next generation iPhone 3GS boosted both hardware maker Apple, up 5.4%, and wireless-service provider AT&T, up 6.1%.
The Morningstar Core Bond Index ended down 0.2% last week as continued softness in Treasuries was partially offset by gains in corporate bonds.
The Morningstar US Government Bond Index fell 0.6% while the Morningstar Corporate Bond Index gained 0.3%. The difference in yields between Treasuries and corporate bonds now sits at 113 basis points, which is within the normal historical range.
Commodities rallied last week as the Morningstar Long-Only Commodity Index increased 4.5%. The energy sector contributed the most, thanks to crude oil climbing 9%. The only segment down (mainly due to hogs) was livestock, which fell 7%. The Morningstar Long/Short Index eked out a 0.1% gain, despite the fact that only six commodities are in the long position. The current signal is to short (invest in cash for energy-related commodities) the other 13 commodities, so continued strength in commodity prices would have a similar impact on returns.
| Bond Index One-Week Returns (Data as of 07-23-09) | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | -0.22 | 3.52 | 4.90 |
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| US Government Bond | -0.56 | 2.39 | 4.81 |
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| Corporate Bond | 0.32 | 5.20 | 5.77 |
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| Mortgage Bond | -0.18 | 3.70 | 4.51 |
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| Commodity Index One-Week Returns (Data as of 07-23-09) | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | 4.46 | 7.88 |
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| Long/Flat Commodity | 0.69 | -0.24 |
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| Long/Short Commodity | 0.11 | -4.70 |
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For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com