Week Ended March 15, 2013

Gains drive S&P 500 within hair's breadth of record

Economic data and hopes for stronger growth in consumer spending helped drive the Dow Jones Industrial Average to a new record and the S&P 500 Index within two points of the all-time closing high it established in 2007. Stocks rose through most of the week before falling back Friday. The Wall Street Journal reported that the Dow's 10-day run of gains through Thursday marked only the fourth time the average had achieved such a feat since the end of World War II—the last time was in January 1992.

Retail sales data bolster earnings hopes

With few corporate earnings being released, investors appeared to focus more on economic data and what they might signal about corporate profits. News of strong growth in retail sales in February was particularly encouraging. Sales grew at the fastest rate in five months, relieving fears that the payroll tax hike at the start of the year would cause consumers to rein in spending. Rising gasoline prices were partly responsible for the increase, but Americans increased spending on a variety of other goods as well, including automobiles. The healthy spending patterns appeared to show up in the results of Costco, a major retailer that did release earnings this week.

Consumers spending but not celebrating

Stocks pulled back from their winning streak on Friday. One factor in the retreat may have been the release of a consumer sentiment index that surprised many by declining. The improving job market and rising house and stock prices have helped boost confidence lately, but high gasoline prices and worries over political gridlock in Washington may be weighing on Americans' mood even as they increase their spending.

Tax changes should not alter long-term investment plans

Along with the payroll tax increase, tax rates have recently risen for some higher-income Americans. T. Rowe Price managers note that while some high-income investors may want to review their taxable versus tax-exempt investment strategies and retirement programs, the higher tax rates should not be cause for fundamental changes to their long-term investment plans. One's investment selection should be guided primarily by long-term goals and risk tolerance, rather than tax considerations.

U.S. Stocks1

Index2

Friday's Close

Week's Change

% Change
Year-to-Date

DJIA

14514.11

117.04

10.76%

S&P 500

1560.72

9.54

9.43%

NASDAQ Composite

3249.07

4.70

7.60%

S&P MidCap 400

1141.89

10.97

11.90%

Russell 2000

952.33

9.89

12.12%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

2The Dow Jones Industrial Average and the Standard & Poor's 500 Stock Index of blue chip stocks, the Standard & Poor's MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.