Mostly Positive Earnings Can't Ignite Markets
Is the pause a natural breather or the start of something negative?
Market Update
Corporate earnings were generally positive over the week but failed to ignite the markets. The big question investors are asking is whether this performance is a natural breather after running up 24% so far this year, or the start of something negative.
Economic indicators were mixed as well. Jobless claims edged up by 11,000 to a higher-than-expected 531,000 for the week. On the flip side, the four-week average jobless claims remain downward trending.
The Morningstar US Market Index fell 0.85% for the week. Large stocks beat their smaller counterparts. The Morningstar Large Cap Index fell 0.66% and the Morningstar Small Cap Index fell 1.95%. Growth stocks and value stocks fell as well. The few sectors in the black were led by the software sector, up 1.89%.
One notable media company was the New York Times (NYT), which was one of the top five gainers for the week, advancing 20%. The market reacted positively to the company's announced results, with deft cost-cutting in the face of continuing softness in print advertising revenue. These types of results may be hinting that the worst of the ad spending downturn is behind us.
The Morningstar Core Bond Index ended up 0.28% for the week. Gains were across the board. The Morningstar US Government Bond Index rose 0.25% while the Morningstar Corporate Bond Index increased 0.73%. The spread between Treasury and corporate bonds continues to narrow and stands at 217 basis points. This is an elevated level compared with the historical levels of around 100-150 basis points.
The Morningstar Long-Only Commodity Index increased 3%. Agriculture was the top-performing sector, beating out the energy sector, which has been on a tear over recent weeks. Still, the energy sector is up 14% for the month. The Morningstar Long/Short Index gained 0.11%, owing in part to the cash position instead of a long position in gas-oil, commonly referred to as heating oil. Natural gas continued to gain this week, up 3.5%.
| Bond Index One-Week Returns (Data as of 10-22-09) | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | 0.28 | 3.01 | 4.16 |
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| US Government Bond | 0.25 | 2.18 | 4.93 |
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| Corporate Bond | 0.73 | 4.35 | 5.93 |
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| Mortgage Bond | 0.06 | 3.05 | 2.41 |
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| Commodity Index One-Week Returns (Data as of 10-22-09) | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | 3.06 | 17.78 |
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| Long/Flat Commodity | 1.45 | 3.53 |
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| Long/Short Commodity | 0.11 | -3.63 |
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For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com