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Week Ended April 20, 2012

Stocks gain on solid earnings, but questions linger over U.S. economy and European debt

Markets enjoyed their first weekly gain this month, although the technology-heavy Nasdaq moved lower. Earnings remain generally strong, highlighted during the week by solid reports from some prominent consumer and health care firms. Tech shares were particularly volatile during the week, however, due to revenue and margins concerns. Apple, whose large weighting in the Nasdaq and S&P 500 can have a significant effect on market moves, also proved volatile as investors reconsidered the stock's exceptional rally in recent months.

The week's economic data restrained the market's advance, as investors worried that the U.S. economy was experiencing a third consecutive springtime slowdown. Investors appeared particularly discouraged by a decline in March housing starts. Although much of the decline reflected a pullback in multifamily construction following strong recent gains, the more important single-family construction trend remains on a moderate upward trajectory. Nevertheless, the headline weakness, coupled with a decline in an index of regional manufacturing activity, weighed on sentiment. A smaller-than-expected decline in weekly jobless claims and an upward revision to the previous week's numbers also raised questions about the labor market recovery. T. Rowe Price economists note that while employment growth is indeed slowing from its heated pace in the last two quarters, they expect that the deceleration should be far milder than last year.

Some reassuring signals regarding the European debt crisis may have buoyed markets, but the news from Europe was mixed. A Spanish government bond auction on Tuesday was met with healthy demand, and European officials denied the need for a bailout of the country—a much larger task than rescuing the relatively small Greek economy. Nevertheless, Spanish stocks fell to a new post-financial crisis low on Thursday, after a disappointing rise in yields following an auction of 10-year Spanish bonds. Worries remain that Spanish bond yields will increase further once banks are unable to purchase them with expiring loans provided by the European Central Bank.

U.S. Stocks¹
Index²	Friday's Close	Week's Change	% Change Year-to-Date
DJIA	13029.26	179.67	6.64%
S&P 500	1378.53	8.27	9.62%
NASDAQ Composite	3000.45	-10.88	15.17%
S&P MidCap 400	977.11	12.91	11.10%
Russell 2000	804.34	8.00	8.59%

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.

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U.S. Bond Market

Week Ended April 20, 2012

Good Demand for Spanish Bonds, but Crisis Not Over

The auction of Spanish bonds went better than expected during the week, as solid demand helped allay the concerns of many fixed income investors. Satisfactory demand, however, was not enough to hold interest rates in check. The yield on Spanish 10-year securities rose close to 6% compared with 1.7% for more stable German bonds with the same maturities. Part of the spread reflected higher inflation forecasts in the eurozone and the UK and an upwardly revised global growth forecast from the IMF. The weakness in Spanish bonds following the auction also indicated that more work needs to be done to resolve the ongoing European sovereign debt crisis. The country that is at the heart of Europe's fiscal crisis, Greece, saw its 10-year bond yield soar to 21%, indicating that investors are not yet convinced that the worst is finally over.

In the U.S. market, investment-grade corporate bonds have benefited from significant investor inflows in recent months, and our corporate sector team has been emphasizing bonds that appear to offer good value within this asset class to maximize return potential. Treasury inflation protected securities ended mixed, with the two-year yield differential tightening and longer-term yields spreads growing wider. Treasury yields were more stable and closed near their levels of a week earlier.

U.S. Treasury Yields¹
Maturity	April 20, 2012	April 13, 2012
2-Year	0.27%	0.27%
10-Year	1.96%	1.98%
30-Year	3.12%	3.13%

This table is for illustrative purposes only. Past performance cannot guarantee future results.

¹Source of data: Bloomberg.com, as of 4 p.m. ET Thursday, April 20, 2012.

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International Market

Week Ended April 13, 2012

International Stocks

Foreign stock markets closed lower for the week ending April 13, 2012 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), losing -1.13%.


Region/Country	Week's Return	% Change Year-to-Date
EAFE	-1.13%	6.46%
Europe ex-U.K.	-2.53%	5.09%
Denmark	0.08%	18.99%
France	-3.35%	3.20%
Germany	-2.50%	13.06%
Italy	-5.52%	-3.59%
Netherlands	-2.45%	1.22%
Spain	-4.62%	-13.36%
Sweden	-1.51%	7.99%
Switzerland	-1.23%	6.32%
United Kingdom	-0.95%	4.85%
Japan	0.36%	7.95%
AC Far East ex-Japan	0.02%	13.45%
Hong Kong	-0.32%	13.28%
Korea	-1.96%	15.73%
Malaysia	0.67%	9.09%
Singapore	0.93%	18.29%
Taiwan	0.94%	12.66%
Thailand	-0.73%	18.53%
EM Latin America	-2.25%	10.58%
Brazil	-1.59%	9.58%
Mexico	-4.86%	9.60%
Argentina	-1.37%	-19.01%
EM (Emerging Markets)	-0.93%	12.60%
Hungary	-6.09%	10.31%
India	-3.21%	16.63%
Israel	-1.55%	8.48%
Russia	-0.05%	16.89%
Turkey	-0.39%	23.54%

International Bond Markets

International bond markets in developed countries were higher this week, with the J.P. Morgan Global Government Bond Less U.S. Index gaining 1.18%.


Region/Country	Week's Return	% Change Year-to-Date
Developed Markets	1.18%	-0.70%
Europe
Denmark	0.98%	-0.25%
France	0.35%	2.06%
Germany	0.65%	1.90%
Italy	-0.38%	9.92%
Spain	-0.89%	-1.10%
Sweden	0.02%	0.46%
United Kingdom	1.37%	1.43%
Japan	2.04%	-4.48%
Emerging Markets	0.62%	4.56%
Argentina	1.03%	0.71%
Brazil	1.44%	2.93%
Bulgaria	-0.19%	3.22%
Russia	0.00%	4.51%

International Currency Markets

On the currency front, the U.S. dollar was weaker against the major currencies for the week.


Currency	Close (April 13, 2012)	Week's Return (U.S. $)	% Change Year-to-Date (U.S. $)
Japanese yen	80.975	-1.72%	4.98%
Euro	1.3083¹	-0.15%	-0.78%
British pound	1.5885¹	-0.34%	-2.21%

¹U.S. dollars per national currency unit.

Sources: Foreign stock markets and currency sections are from Rimes Technologies, using MSCI data. International bond markets are from J.P. Morgan.

Note: All returns are in U.S. dollars. All bond indices are J.P. Morgan. All stock indices are Morgan Stanley Capital International (MSCI).

Equity Indices
EAFE:	MSCI Europe, Australasia, and Far East Index
Europe Ex-U.K.:	MSCI Europe ex-U.K. Index
Far East Ex-Japan:	MSCI AC Far East ex-Japan Index
Latin America:	MSCI Emerging Markets Latin America Index
Emerging Markets:	MSCI Emerging Markets Index

Bond Indices
Developed Markets:	J.P. Morgan Global Government Bond Less U.S. Index
Emerging Markets:	J.P. Morgan Emerging Markets Bond Index Plus

All charts are for illustrative purposes only and do not represent the performance of any specific security. Past performance cannot guarantee future results.