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Week Ended August 12, 2011

Stocks closed modestly lower for the week, but the 1% to 2% drop in the major averages masked one of the most volatile weeks in market history. Stock prices plunged on Monday, causing the major averages to record their worst daily losses since the financial crisis of 2008. A major drop had been feared all weekend following Standard & Poor’s announcement after the close of trading on Friday that it was downgrading the U.S. credit rating, from AAA to AA+. The downgrade was widely interpreted as an indictment of the nation’s political system and its ability to wrestle with long-term fiscal challenges rather than signaling any risk of default in the foreseeable future. Indeed, the price of U.S. Treasuries increased—and some Treasury yields reached all-time lows—as investors continued to treat government bonds as a safe haven and worried less about inflation given the worsening economic outlook. Markets came roaring back late Tuesday following the Federal Reserve’s announcement that it would keep short-term interest rates near 0% for another two years while exploring "a range of policy tools" to provide more stimulus to the economy. Stocks reversed their gains on Wednesday, however, as worries grew that French banks might suffer further damage from the European banking crisis. As was the case earlier in the week, financial stocks bore the brunt of the selling on U.S. markets. Thursday saw yet another swing higher as an encouraging weekly jobless claims report in the U.S. encouraged investors to seek bargains among trammeled shares. Signs that the economic recovery was continuing helped the markets rally to end the week. Investors were encouraged by a healthy rise in retail sales in July, which suggested that consumers were opening their wallets despite widespread gloom about the economy and political situation.

U.S. Stocks¹
Index²	Friday's Close	Week's Change	% Change Year-to-Date
DJIA	11269.02	-175.59	-2.66%
S&P 500	1178.81	-20.57	-6.27%
NASDAQ Composite	2507.98	-24.43	-5.46%
S&P MidCap 400	843.08	-1.70	-7.07%
Russell 2000	696.90	-18.98	-11.25%

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 August 12, 2011

Treasury prices rose for the third straight week on rising concerns that the U.S. economy is stalling and Europe’s debt crisis is worsening. Yields on U.S. Treasuries touched new lows in a volatile trading week triggered by Standard & Poor's downgrade of U.S. government debt last Friday. Two- and 10-year note yields fell to record lows on Tuesday, after the Federal Reserve said it would keep its benchmark short-term interest rate close to 0% for another two years as the economic outlook has deteriorated. Economic and political uncertainty in recent weeks has buoyed the Treasury market as investors sought safety amid severe market volatility, despite the S&P downgrade of the nation’s credit rating. In the U.S., fears about a possible government default gave way to worries about the flagging recovery; in Europe, investors fretted that the sovereign debt crisis may spread to Italy and Spain, both of which are struggling with huge debt. In economic news, the Commerce Department on Friday reported that U.S. retail sales rose 0.5% in July, the most in four months. However, the relatively strong retail sales data were offset by a later report showing that U.S. consumer confidence sank in August to its lowest reading since 1980, underscoring how the weak jobs market, the threat of a U.S. default, and the previous week’s stock plunge took its toll on consumer sentiment.

U.S. Treasury Yields¹
Maturity	August 12, 2011	August 5, 2011
2-Year	0.18%	0.28%
10-Year	2.24%	2.55%
30-Year	3.71%	3.84%

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

¹Source of data: Bloomberg.com, as of 4 p.m. ET Friday, August 12, 2011.

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International Market

Week Ended August 5, 2011

International Stocks

Foreign stock markets closed lower for the week ending August 05, 2011 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), losing -9.82%.


Region/Country	Week's Return	% Change Year-to-Date
EAFE	-9.82%	-6.49%
Europe ex-U.K.	-11.54%	-6.22%
Denmark	-11.74%	-12.60%
France	-11.88%	-5.69%
Germany	-14.06%	-4.94%
Italy	-13.86%	-12.69%
Netherlands	-9.17%	-7.98%
Spain	-10.39%	-3.41%
Sweden	-13.79%	-12.72%
Switzerland	-7.66%	0.68%
United Kingdom	-9.58%	-4.46%
Japan	-6.38%	-7.59%
AC Far East ex-Japan	-7.71%	-3.82%
Hong Kong	-6.56%	-5.97%
Korea	-10.20%	-0.80%
Malaysia	-3.06%	4.45%
Singapore	-7.08%	-1.29%
Taiwan	-9.04%	-10.46%
Thailand	-5.20%	8.11%
EM Latin America	-10.18%	-14.58%
Brazil	-11.27%	-16.35%
Mexico	-7.99%	-8.67%
Argentina	-8.09%	-18.57%
EM (Emerging Markets)	-8.43%	-7.83%
Hungary	-12.37%	-0.70%
India	-5.97%	-15.91%
Israel	-9.72%	-18.17%
Russia	-9.55%	1.58%
Turkey	-12.30%	-23.51%

International Bond Markets

International bond markets in developed countries were lower this week, with the J.P. Morgan Global Government Bond Less U.S. Index losing -0.83%.


Region/Country	Week's Return	% Change Year-to-Date
Developed Markets	-0.83%	6.43%
Europe
Denmark	0.14%	10.53%
France	-0.50%	9.23%
Germany	0.14%	10.39%
Italy	-2.10%	0.87%
Spain	-0.59%	5.88%
Sweden	-1.80%	10.86%
United Kingdom	1.16%	11.63%
Japan	-1.16%	4.83%
Emerging Markets	0.20%	7.40%
Argentina	-5.85%	-3.99%
Brazil	0.67%	9.26%
Bulgaria	-0.51%	2.50%
Russia	-0.31%	6.58%

International Currency Markets

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


Currency	Close (August 05, 2011)	Week's Return (U.S. $)	% Change Year-to-Date (U.S. $)
Japanese yen	78.490	1.66%	-3.33%
Euro	1.4193¹	1.23%	-5.80%
British pound	1.6385¹	0.19%	-4.65%

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.