Market Update: 26 February 2010

The Economy

• Weaker-than-expected economic news and increased concern over sovereign debt issued by Greece and other peripheral European nations cast a pall on market sentiment.
• Bank of England Governor Mervyn King stated that the central bank may need to increase stimulus efforts to stave off possibilities of the economy falling back into recession due to negative economic news emerging from Europe.
• U.K. consumer confidence increased in February to its highest level in four months.
• U.K. house prices fell for the first time in ten months during February.
• U.S. Federal Reserve Chairman Ben Bernanke reiterated that the federal funds rate (the rate banks charge each other to borrow money) will stay at record lows for “an extended period of time.”
• U.S. consumer sentiment fell in January on worries about unemployment and the sustainability of the economic recovery.
• U.S. new-home sales fell unexpectedly in January to a record low.
• Initial U.S. jobless claims rose more than expected for the week.
• Orders for U.S. durable goods rose 3% in January, the biggest gain since July, mostly due to an increase in the production of airplanes.

Stocks

• Global markets fell for most of the week on gloomy economic news.
• In the U.K., Financials led, while Materials and Energy lagged.
• In Europe, Consumer Staples and Information Technology led, while Materials and Energy lagged.
• In the U.S., value stocks outperformed their growth counterparts, and large-company stocks outperformed their small-company brethren. Healthcare led the way, while Materials lagged.

Bonds

• Global bond markets rose as concerns escalated over the possibility of defaults for Greek sovereign debt.
• Globally, government bonds outperformed bonds perceived to be riskier, such as corporate bonds, high-yield bonds and emerging-market debt.
• Germany announced that it may buy Greek bonds through KfW Group, a state-owned lending group.
• Yields for 10- and 30-year U.S. Treasuries fell to two-week lows (yields move inversely to prices), as investors moved to the perceived safety of these securities amid the threat of Greek government bond ratings downgrades. 

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