Fundamentals Returning to the Forefront
Although financial reports continue to show that companies are struggling to increase the top line, they have still generally been able to meet earnings expectations.
Credit markets were soothed by Fed chairman Ben Bernanke's commentary that the Federal Reserve would be flexible in its monetary policy and respond to incoming economic data. The average spread in the Morningstar Corporate Bond Index tightened 7 basis points last week to +145 and has recaptured about half of the spread widening the market has experienced since its tightest level this year of +129 was reached May 15.
We still don't think there is any substantive change in the Fed's policy stance since the Q&A session following the Federal Open Market Committee meeting June 19, as the chairman has been clear that the Fed would begin to taper asset purchases as early as this fall and end all purchases by next summer if the economy and the unemployment rate develop as the FOMC expects.
David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.