Markets Stay Green, But Are Consumers Still Blue?
An undercurrent of less encouraging consumer data lies beneath a resilient market.
Market Update
Global equity markets started the new year on a positive note, and the Morningstar US Market Index posted gains each day this week. However, lurking beneath the facade of this good news is an undercurrent of less encouraging data, especially around the consumer.
Consumer credit dropped by a record $17.5 billion in November, underscoring the notion that the 26-year-high unemployment rate is muffling consumer spending. Given that consumer spending makes up two-thirds of the U.S. economy, weakness here hurts. However, the markets are looking through it for now.
The Morningstar US Market Index gained 2.9% for the week. Like much of 2009, all cap indexes gained. The Morningstar Small Cap Index rose 3.6%, and the Morningstar Large Cap Index gained 2.6%.
Unlike most of 2009, value did better than growth stocks this week. The Morningstar US Value Index rose 3.7%, and the Morningstar US Growth Index gained 2.5%.
The financial services sector turned in an excellent week, advancing 4.9%. Several of the big banks notched gains, such as Bank of America (BAC), J.P. Morgan Chase (JPM), and Wells Fargo (WFC), up 11.4%, 7.4%, and 7.0%, respectively.
Most of the major fixed income sectors finished positive this week too. The Morningstar Core Bond Index rose 0.38%. Treasuries and corporate bonds gained. The Morningstar US Government Index gained 0.2%, and the Morningstar Corporate Bond Index rose 0.7%.
It was generally a good week for commodities, with both energy and metals up big this week. The Morningstar Long-Only Commodity Index rose 2.4%. While oil and natural gas diverged for most of 2009, both energy commodities rose this week. Oil and natural gas both gained 4%. Outside of energy, coffee posted the biggest jolt, notching a 4.4% gain. Interestingly, coffee prices rose even though the Brazilian Commodity Supply Corp released estimates that the country could see a larger crop than usual later in 2010.
| Bond Index One-Week Returns (Data as of 01-08-10) | |||
 | | | |
|
| 1 Wk | Yield | Duration |
| |||
| Core Bond | 0.38 | 3.14 | 4.37 |
 | |||
| US Government Bond | 0.20 | 2.34 | 4.86 |
| |||
| Corporate Bond | 0.69 | 4.21 | 5.94 |
| |||
| Mortgage Bond | 0.38 | 3.34 | 2.96 |
|
| Commodity Index One-Week Returns (Data as of 01-07-10) | ||
| | |
| 1-Week Return % | YTD Return % | |
| ||
| Long-Only Commodity | 2.43 | 2.43 |
| ||
| Long/Flat Commodity | 1.99 | 1.99 |
| ||
| Long/Short Commodity | 1.79 | 1.79 |
|
For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com