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Week Ended December 23, 2011

Markets enjoyed a healthy gain for the week as attention shifted back to the U.S. economy, which continued to show signs of resilience in the face of the European financial crisis. On Tuesday, stocks surged in response to news that U.S. housing construction had jumped to its highest level in nearly two years, with multifamily housing starts showing a particularly strong gain due to the tight rental market. The positive signals from the housing market were bolstered later in the week, when word came that single family home sales had reached their highest level in several months, while the inventory of houses for sale was at its lowest level in over five years. Thursday brought news that weekly jobless claims had fallen to their lowest level since April 2008. Perhaps reflecting greater confidence about the job market, a gauge of consumer sentiment registered an encouraging increase. Not all the week's news was favorable, however. Financials shares retreated at the start of the week, following a reporting that U.S. banks might become subject to international capital reserve requirements, which would weigh on profitability. Investors also worried about a dire assessment of the European economy from the head of the European Central Bank. Indeed, the ECB revealed on Wednesday that it had loaned $640 billion to the continent's banks as part of its refinancing operations—a much larger amount than most had anticipated and one that suggested the severe strains that banks were facing. In the U.S., a downward revision to third-quarter growth estimates may have also restrained gains somewhat. In addition, a modestly disappointing capital goods report for November indicated that fourth-quarter growth might not be as robust as initially thought.

U.S. Stocks¹
Index²	Friday's Close	Week's Change	% Change Year-to-Date
DJIA	12294.00	427.38	6.19%
S&P 500	1265.33	45.67	0.61%
NASDAQ Composite	2618.64	63.31	-1.29%
S&P MidCap 400	883.88	30.34	-2.58%
Russell 2000	747.36	27.02	-4.83%

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 December 23, 2011

The Commerce Department reported that durable goods orders rose 3.8% from October through November. The pace of shipments for the two months is below the average for the third quarter ended in September and suggests that spending on equipment is slowing in the final quarter of 2011. That said, manufacturing inventories rose 0.6% last month, providing a partial offset to the data. Personal income and consumption also rose slightly. Putting the information in perspective, we would expect to see real economic growth of between 3.0% and 3.5% for the fourth quarter. The news was mixed on the U.S. housing front, with builders breaking ground on 685,000 new homes in November, a 9.3% increase over October and the highest level since April 2010. A jump in apartment permits spurred much of the advance. However, the Commerce Department also reported that an unsettling 46% of home sales in November were either short or foreclosure sales, with homes selling for less than the outstanding mortgages as we approach the five-year mark in the housing crisis. In the political arena, the Congress wrapped up its business for the year as both houses passed an extension of the payroll tax cut for two months, ending yet another drawn-out drama in the nation's capital that has characterized the environment in Washington through most of the year. Our elected representatives will be forced to take up the issue again early in 2012, so stay tuned for the next chapter of this ongoing political saga. Treasury yields ticked up across the board as we approached the final week of trading with a note of guarded optimism.

U.S. Treasury Yields¹
Maturity	December 23, 2011	December 16, 2011
2-Year	0.28%	0.23%
10-Year	2.02%	1.85%
30-Year	3.06%	2.85%

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

¹Source of data: Bloomberg.com, as of 3 p.m. ET Friday, December 23, 2011.

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International Market

Week Ended December 16, 2011

International Stocks

Foreign stock markets closed lower for the week ending December 16, 2011 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), losing -4.01%.


Region/Country	Week's Return	% Change Year-to-Date
EAFE	-4.01%	-14.40%
Europe ex-U.K.	-6.11%	-18.18%
Denmark	-4.02%	-18.74%
France	-8.20%	-20.70%
Germany	-7.01%	-19.84%
Italy	-8.22%	-24.79%
Netherlands	-6.39%	-16.80%
Spain	-7.60%	-14.76%
Sweden	-5.01%	-20.10%
Switzerland	-2.54%	-9.32%
United Kingdom	-3.12%	-5.85%
Japan	-2.15%	-15.68%
AC Far East ex-Japan	-1.84%	-15.82%
Hong Kong	-1.33%	-17.65%
Korea	-3.02%	-12.00%
Malaysia	-0.47%	-4.26%
Singapore	-1.20%	-17.96%
Taiwan	-2.10%	-23.95%
Thailand	-1.68%	-1.55%
EM Latin America	-4.47%	-20.12%
Brazil	-5.25%	-22.45%
Mexico	-4.12%	-13.83%
Argentina	-4.21%	-39.40%
EM (Emerging Markets)	-3.18%	-19.30%
Hungary	-1.92%	-30.87%
India	-5.44%	-36.03%
Israel	3.77%	-25.19%
Russia	-2.28%	-19.93%
Turkey	-5.63%	-34.44%

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 -0.29%.


Region/Country	Week's Return	% Change Year-to-Date
Developed Markets	-0.29%	5.13%
Europe
Denmark	-0.34%	9.73%
France	-0.94%	1.99%
Germany	-0.60%	6.54%
Italy	-1.98%	-9.31%
Spain	0.47%	2.45%
Sweden	-2.41%	10.18%
United Kingdom	0.65%	15.06%
Japan	0.01%	6.62%
Emerging Markets	-0.22%	8.45%
Argentina	-3.12%	-14.83%
Brazil	-0.05%	13.36%
Bulgaria	0.36%	2.06%
Russia	-0.75%	5.16%

International Currency Markets

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


Currency	Close (December 16, 2011)	Week's Return (U.S. $)	% Change Year-to-Date (U.S. $)
Japanese yen	77.710	0.12%	-4.37%
Euro	1.3047¹	2.38%	2.75%
British pound	1.5527¹	0.60%	0.83%

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.