Sovereign Debt Jitters Jolt Equity Markets
Some EU country deficit woes were a fly in the ointment of generally better economic news this week.
Market Update
Generally upbeat economic news in the U.S. wasn't enough to give equity markets a boost this week. The U.S. unemployment rate decreased to a five-month low of 9.7%, but clouds remain.
One fly in the ointment is the possible contagion from some countries in the European Union that are struggling with deficits, especially Greece. Other measures weighing on the markets include increased regulation of the financial services sector, and China's efforts to curb its domestic lending.
Overall, the Morningstar US Market Index fell 0.74% for the week. While large and small companies both were in the red, larger fared better. The Morningstar Large Cap Index fell 0.7%, and the Morningstar Small Cap Index fell 1.1%.
Value and growth stocks also lost ground this week. The Morningstar US Value Index fell 1.2% and the Morningstar US Growth Index fell 0.3%. The financial services sector was one of the weakest performers again, contributing to the value index's difficulties.
The sector ended the week down 1.6%. Several large banks finished the week with significant declines, such as Wells Fargo (WFC) and US Bancorp (USB), down 3.6% and 4.4%, respectively.
While investors remain nervous despite the U.S. jobs report, bonds turned in another positive week. The Morningstar Core Bond Index rose 0.31%. Treasuries and corporate bonds gained. The Morningstar US Government Index gained 0.33% and the Morningstar Corporate Bond Index rose 0.21%. In contrast to the good times for U.S. bond investors, the Morningstar Global ex-US Government Bond Index on an unhedged basis fell 2.2% for the week.
Commodities this week gave back as well. The Morningstar Long-Only Commodity Index fell 1.2%. Although this index is most heavily weighted toward energy commodities, the 0.6% gain wasn't enough to offset losses in every other commodity sector. Metals posted the biggest decline, falling back 3.1% for the week.
| Bond Index One-Week Returns (Data as of 02-05-10) | |||
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| 1 Wk | Yield | Duration |
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| Core Bond | 0.31 | 2.84 | 4.34 |
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| US Government Bond | 0.33 | 2.13 | 4.91 |
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| Corporate Bond | 0.21 | 4.06 | 5.95 |
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| Mortgage Bond | 0.34 | 2.89 | 2.81 |
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| Commodity Index One-Week Returns (Data as of 02-05-10) | ||
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| 1-Week Return % | YTD Return % | |
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| Long-Only Commodity | -1.21 | -7.21 |
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| Long/Flat Commodity | -1.44 | -6.27 |
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| Long/Short Commodity | -1.38 | -5.45 |
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For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com