U.S. Stock Market

Week Ended April 21, 2011

Stocks moved higher during the week. It began on a down note, as investors reacted to news that Standard & Poor's had lowered its long-term outlook for U.S. government debt from "stable" to "negative," stating that Treasuries could be in danger of losing their AAA credit rating over the next two years if meaningful steps to reduce budget deficits are not taken. While stock prices headed sharply lower on the news, yields on Treasuries fell slightly, suggesting that the rating change had not altered traders' perception of the risk in holding U.S. debt. Indeed, investors may have sold stocks and sought refuge in U.S. Treasuries in reaction to signs of a worsening sovereign debt crisis in Europe: an auction of Spanish treasury bills on Monday received a poor reception, yields on two-year Greek debt approached 20%, and the success of a populist "euro-skeptic" political party in Finnish elections appeared to throw a European Union bailout of Portugal into doubt. Good earnings helped pull the U.S. market out of its doldrums as the week progressed. Investors were particularly pleased with earnings in the technology sector, which helped drive the Nasdaq index to its biggest daily gain in over half a year on Wednesday. Stocks rose modestly on Thursday—the final trading day of the holiday-shortened week—as disappointing manufacturing and unemployment data were offset by strong earnings reports from several blue chip companies.

U.S. Stocks1
Index2	Thursday's Close	Week's Change	% Change Year-to-Date
DJIA	12505.99	121.70	8.02%
S&P 500	1337.38	15.51	6.34%
NASDAQ Composite	2820.16	50.89	6.31%
S&P MidCap 400	995.16	8.97	9.69%
Russell 2000	845.24	8.99	7.64%

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 4:10 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 21, 2011

Treasury yields were little changed in a holiday-shortened week. Renewed concerns about the European debt crisis helped fuel investor demand for the relative safe haven of Treasuries, while an ominous warning about the credit quality of U.S. government debt made some leery of the asset class. On Monday, ratings agency Standard & Poor's affirmed its top AAA rating on Treasury securities but lowered its long-term outlook to "negative" from "stable" for the first time ever. The revised outlook increases the likelihood of a credit rating downgrade within the next two years, a move that could increase borrowing costs and exacerbate the government's fiscal problems. S&P noted significant strengths in the U.S. economy but expressed concern that policymakers may not reach agreement on an effective strategy to tackle mounting deficits. President Obama and Congressman Paul Ryan recently released competing long-term plans to balance the budget. Unfortunately, leading economists have criticized the assumptions made by both plans, and political rancor makes it unlikely that either measure will pass in its current form. In response to the S&P announcement, the Obama administration moved to reassure global credit markets that a downgrade is out of the question and a deficit reduction compromise will be reached.

U.S. Treasury Yields1
Maturity	April 21, 2011	April 15, 2011
2-Year	0.66%	0.69%
10-Year	3.40%	3.40%
30-Year	4.47%	4.46%

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 21, 2011.

 

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International Market

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