Ugly Hue on Consumer Mood Ring
A depressed consumer wrung out by unemployment and housing is not what the stock market had in mind when it started rallying a few months ago.
Market Update
U.S. equity markets ended down this week as investor sentiment stumbled Friday on news of weaker consumer confidence. Consumer spending is a major driver of the U.S. economy; a depressed consumer wrung out by unemployment and housing is not what the stock market had in mind when it started rallying a few months ago.
Nevertheless, inflation isn't out of control yet, and most markets are doing quite well year to date. Corporate bonds, emerging markets, commodities, and growth stocks are up handily this year while market volatility is down. Not a bad way to enter the dog days of summer.
The Morningstar US Market Index ended down this week thanks to economic data detailing lower consumer confidence. A disquieting drop in consumer prices over the year-ago period put investors on edge as well, and small caps took the brunt of the selling. The Morningstar Small Cap Index fell about twice as far as the overall U.S. market this week, with the decline spread equally across value and growth.
The hardware sector was a bright spot this week, driven by strong performance from ADC Telecommunications , Tellabs , and Fairchild Semiconductor .
The Morningstar Core Bond Index was up 0.7% for the week as news of weaker consumer confidence and muted inflation expectations sent some investors to Treasuries. The Morningstar Corporate Bond Index is now up nearly 12% for the year as strong equity returns have opened additional capital structure options for firms, taking pressure off the bond market. Improving credit markets can be a virtuous circle for leveraged firms if lower borrowing costs improve the earnings expectations driving equity markets.
The Morningstar Long-Only Commodity Index was about flat for the week. Sugar rose again thanks to a mix of weather and trade policy issues that have nearly doubled the price of the commodity this summer. Offsetting sugar's increase in the index this week was a modest decline in energy and livestock commodities.
| Bond Index One-Week Returns (Data as of 08-13-09) | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | 0.73 | 3.35 | 4.90 |
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| US Government Bond | 0.72 | 2.38 | 4.93 |
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| Corporate Bond | 0.84 | 4.76 | 5.94 |
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| Mortgage Bond | 0.68 | 3.54 | 4.31 |
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| Commodity Index One-Week Returns (Data as of 08-13-09) | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | -0.01 | 13.73 |
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| Long/Flat Commodity | 0.70 | 1.86 |
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| Long/Short Commodity | 0.94 | -2.66 |
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For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com