Market Week: April 25, 2011

The Markets Take that, S&P: Domestic equities rebounded from a downdraft that followed Standard & Poor's warning about U.S. debt, ending the holiday-shortened week with solid gains. Buoyed by some positive corporate earnings, the S&P 500 made another run at 1340 but remained in the trading range of roughly 1300-1340 that it's been in since early February. The Dow ended the week at its highest level in almost three years and took the lead from the small-cap Russell 2000 in the year-to-date performance sweepstakes. Treasury bonds also seemed to thumb their noses at the S&P warning. Ten-year Treasury yields ended the week basically flat; in fact, the Treasury had to set a minimum positive coupon rate for an auction of five-year Treasury Inflation-Protected Securities (TIPS), which had been trading in the secondary market with a negative yield.

Market/Index 2010 Close Prior Week As of 4/22 Week Change YTD Change DJIA 11577.51 12341.83 12505.99 1.33% 8.02% Nasdaq 2652.87 2764.65 2820.16 2.01% 6.31% S&P 500 1257.64 1319.68 1337.38 1.34% 6.34% Russell 2000 783.65 834.98 845.64 1.28% 7.91% Global Dow 2087.44 2177.52 2207.21 1.36% 5.74% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 3.30% 3.43% 3.42% -1 bps 12 bps Last Week's Headlines Standard & Poor's issued a negative long-term outlook on U.S. debt, saying the potential for a prolonged stalemate over how to deal with budget shortfalls increases the chance of a downgrade of the nation's AAA bond rating in the next two years unless the issues are addressed. Building permits were up 11.2% in March compared to February, and housing starts rose 7.2%, the Commerce Department said. However, both were still down more than 13% from last March. Sales of existing homes were up 3.7% in March, according to the National Association of Realtors®. While not stellar, the figure is an improvement over February's 8.9% decline. Gold hit a new record of $1,500 an ounce just two months after first reaching $1,400, while oil prices showed few signs of retreating. After rising for seven consecutive months, regional manufacturing tracked by the Philadelphia Federal Reserve Bank fell sharply in April. Though the 18.5% figure for the Philly Fed's manufacturing index still represented growth, it was a far cry from March's 43.4% increase. The Conference Board's index of leading economic indicators was up 0.4% in March. The most positive factors were the 10-year Treasury/Fed funds interest rate spread and increased housing permits, while consumer expectations were a drag on the index. Eye on the Week Ahead Some Nasdaq-listed stocks could see volatility in advance of the May 2 rebalancing of the stocks that comprise the Nasdaq 100 index. The announcement coming out of the Federal Open Market Committee meeting--the next-to-last before the scheduled demise of quantitative easing (QE2) at the end of June--will be scrutinized for any clues about possible policy shifts. Finally, the initial estimate for Q1 economic growth will be of interest. Key dates and data releases: new-home sales (4/25); home prices (4/26); durable goods orders, Federal Open Market Committee (FOMC) announcement (4/27); Q1 gross domestic product (GDP) initial estimate, pending home sales (4/28); personal income/spending (4/29). Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment. --see disclaimer below--