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.
• Federal Reserve Chairman Ben Bernanke reiterated that the federal funds rate will stay at record lows for “an extended period of time.”
• U.S. consumer sentiment fell from 74.4 to 73.6 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 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.
• Bank of England Governor Mervyn King stated that due to negative economic news emerging from Europe, the central bank may need to increase stimulus efforts to stave off possibilities of a double-dip recession.
• U.K. consumer confidence increased in February to its highest level in four months, even as house prices fell for the first time in ten months.

Economic Calendar

• Personal income, personal spending, personal consumption expenditures and the Institute for Supply Management (ISM) Manufacturing Index will be released March 1.
• Vehicle sales will be released March 2.
• ISM Non-Manufacturing Index, ADP employment report and the Federal Reserve Beige Book will be released March 3.
• Unit labor costs, initial jobless claims, continuing claims and factory orders will be released March 4.
• The change in nonfarm payrolls, the unemployment rate and consumer credit will be released March 5.

Stocks

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

Bonds

• Global bond market prices 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.
• U.S. Treasury yields fell (yields move inversely to prices), as investors moved to the perceived safety of these securities amid the threat of Greek government bond ratings downgrades.
• Yields for 10- and 30-year U.S. Treasuries fell to two-week lows.
• Germany announced that it may buy Greek bonds through KfW Group, a state-owned lending group.

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