Market Update

The Economy

• Mixed data including good news from the U.S. and UK combined with worries about Japanese and Greek sovereign debt to create a rollercoaster ride of a week. The data was in line with our view that the economy will proceed to heal slowly amid setbacks.
• U.S. gross domestic product (GDP) gained a whopping 5.7% for the fourth quarter, the largest gain in six years.
• The Federal Reserve voted to keep the federal funds rate at a range of zero to 25 basis points and reiterated its view that interest rates will stay low for “an extended period.”
• After doubts about his reappointment, Fed Chairman Ben Bernanke was confirmed for another term.
• U.S. home sales, durable goods orders and jobless claims were weak, but durable goods orders ex-transportation were better than expected.
• U.S. consumer confidence rose to 74.4 in January, its highest level in two years.
• Fourth-quarter UK GDP posted a 0.1% gain, marking an end to the longest recession on record, even as UK house prices increased by 1.2%, the largest jump in five months, and consumer confidence rose in January for the first time in three months.
• The unemployment rate for the euro zone rose to 10%.

Economic Calendar

• The Institute for Supply Management (ISM) Manufacturing Index and core personal consumption expenditures will be released February 1.
• Pending home sales and vehicle sales will be released February 2.
• The Automatic Data Processing employment report and the ISM Non-Manufacturing Index will be released February 3.
• Initial jobless claims and unit labor costs will be released February 4.
• The change in nonfarm payrolls, the unemployment rate and consumer credit will be released February 5.

Stocks

• Global markets fell for the week but recouped some of their losses at the end of the week due to economic improvements in the U.S., UK and Brazil.
• In the U.S., large caps outperformed their small-cap brethren. Value stocks outperformed their growth counterparts.
• In the U.S., Consumer Staples was the best-performing sector, while Materials lagged behind the broader markets.
• UK and European equity markets regained some ground after falling earlier in the week.
• Gold declined 1.5% for the week as the U.S. dollar strengthened on concerns about Greece’s fiscal spending.

Bonds

• Global government bond yields rose at the end of the week due to a better global economic outlook.
• U.S. two-year Treasuries posted their first weekly decline for the year.
• Greek sovereign debt prices declined, as speculation loomed regarding whether the nation will need EU financial assistance to curb its financial troubles.
• Standard and Poor’s warned Japan that its debt may face a downgrade due to its massive public spending and deflationary environment.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only.

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