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Market Update

Santa Claus Rally Starting Early?

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U.S. equity markets were up again this week thanks to positive earnings news from early reporters. Bond prices slipped again this week as investors rotated from bonds to stocks. Commodities rallied strongly this week on strength in energy due to tighter-than-expected supply numbers.

The Morningstar US Market Index rose nearly 1.5% this week. The Morningstar Large Growth Index was this week's relative winner, with a positive increase near 2%. Decent stock returns from a diverse set of firms such as  Microsoft (MSFT),  Schlumberger (SLB), and  Abbott Laboratories (ABT) helped lift the index. The Morningstar Small Value Index ended the week nearly flat as strong returns from  AK Steel (AKS),  Temple-Inland (TIN), and  Polaris Industries (PII) were offset by stock price declines in Domino's Pizza (DPZ),  Vishay Intertechnology (VSH), and  Fairchild Semiconductor (FCS). The Morningstar Global Ex US Index was up over 2% this week thanks to strong equity market performance from emerging markets.

The Morningstar Core Bond Index was down 0.6% as both the Morningstar US Govt Index and Corporate Index were down around 0.8% each this week. The Morningstar Mortgage Index was only down 0.2%. Corporate bond prices were down as spreads generally tightened on credit quality optimism. Government bond prices moderated as yields rose slightly early in the week related to soft demand for a recent 30-year Treasury bond auction. Treasury prices firmed a bit later in the week on bargain hunting.

The Morningstar Long-Only Commodity Index was up significantly again this week. Several energy commodity contracts posted high-single-digit price increases on news that inventory levels were a little lower than anticipated. Natural gas was the contrarian, with contract prices falling nearly 6% on ample inventory and moderate demand. The Morningstar Long/Short Index was down for the week as several short positions in agricultural commodities saw modest price increases.

 

 Bond Index One-Week Returns (Data as of 10-15-09)

 

1 Wk
Return (%)

Yield Duration
Core Bond -0.61 3.06 4.11
US Government Bond -0.84 2.20 4.86
Corporate Bond -0.83 4.44 5.75
Mortgage Bond -0.24 3.10 2.46

 
 Commodity Index One-Week Returns (Data as of 10-15-09)
  1-Week Return % YTD Return %
Long-Only Commodity 1.84 14.28
Long/Flat Commodity -0.42 2.06
Long/Short Commodity -1.16 -3.73

For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com

Rod Bare does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.