Standard & Poor’s downgraded the U.S. debt rating from AAA to AA+ on Friday. The news is likely to impact markets in the coming days.
In our opinion, the largest holders of longer-term Treasuries (the Federal Reserve, China, and Japan), along with some of the largest funds in the world, still consider U.S. Treasuries to be the safest security globally. Read more now.
Continued concerns over Europe’s sovereign debt hit equity markets hard last week, leading the S&P 500 to lose a little more than 2 percent in a volatile week.
Italy’s borrowing costs have become dangerously close to unsustainable levels, in what looks to be a contagion effect in the region. This is precisely what the European Union and the International Monetary Fund were hoping to avoid by helping Greece, Portugal, and Ireland.
Treasuries sold off the most they have in months, and yields reached levels we haven’t seen since April. The longer part of the curve moved the most as the second round of quantitative easing (QE2) came to its official end.
Municipals had the best-performing quarter since 1992, returning 4.45 percent in the last three months, as institutional investors found attractive yields.
Equity markets were mixed during a volatile week; riskier indices like the MSCI Emerging Markets Index increased, while developed markets lost ground.
Technical factors have continued to influence equity markets. The S&P 500 has bounced off its 200-day moving average twice recently. If it were to close below that level, 1,250 and 1,220–1,225 are the next support levels that could be strong tests.
Economic data was mixed last week. Reports showed some slowing in retail sales and manufacturing, although the numbers were better than forecasters had predicted. Read more now in our Weekly Market Update.
The Federal Reserve’s Beige Book was released last Wednesday. The report focuses on economic activity in all 12 major districts and is the basis for topics to be covered during the next FOMC meeting on June 22.
Comments by Fed Chairman Bernanke did little to inspire equity investors, and equity markets fell for the sixth week in a row. Read more now in our Weekly Market Update. (PDF, new window)
Equity markets started strong in the holiday-shortened week, but they fizzled quickly after weak economic reports were released. The S&P 500 declined 2.30 percent
to rest just above 1,300. Last week’s declines marked the fifth consecutive week in which most domestic equity indices have lost ground. Read more in our Weekly Market Summary. (PDF, new window)
The European debt crisis, combined with somewhat disappointing economic numbers that point to a slowdown in the second half of the year, contributed to a Treasury rally. he 10-year was as low as 3.04 percent early Friday morning, its lowest point since Dec. 7, 2010. Read more in our Weekly Market Summary. (PDF, new window)
Last week, two-year Treasuries ended at 0.521 percent, close to this year’s lows. The 10-year began last week with a strong rally, as yields dipped below 3.10 percent for the first time in 2011. Read more in our Weekly Market Summary.
Domestic equity markets were mostly flat last week while international markets were relatively weaker due, in large part, to a stronger dollar.
Also, treasuries’ strong performance slowed last week, as the 2-year, 10-year, and long bond came off their lowest levels in a month. Read more in our Weekly Market Summary.
