(For the week ended May 17, 2013.)

The stock market rally continued with another week of strong performance by major stock benchmarks, buoyed by positive news on consumer spending and other indicators. The S&P 500 is now up more than 25% compared to its mid-May 2012 level. The Dow Jones Industrials and Nasdaq Composite are up more than 20%. The week-long run-up wasn’t all smooth, however. Reports of lower-than-expected manufacturing performance drove indexes down on Thursday. The first-quarter earnings season is winding down. Companies tended to beat analysts’ expectations, but those expectations had been modest.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Consumers Spend Retail sales in April were buoyed by a strengthening job market and decline in gasoline prices. The total value of new car sales in April jumped by 1.0% over March. But the number of units sold slid to an annual pace of 14.9 million from March’s 15.2 million, suggesting consumers shifted their preference to more expensive cars.

The Fed Considers Reducing Its Stimulus Economic regulators at the Federal Reserve signaled that they could begin tapering down their economic stimulus program by the end of the year. But they also said that they would watch job market changes in the meantime and could even step up their bond purchases if needed.

Bond Market Update The benchmark 10-year Treasury yield closed out the week little changed from its prior week level at 1.95%. The 30-year benchmark ended at 3.16%. The spread between the Treasury’s inflation-protected bonds and its fixed-rate bonds was a small amount larger than it was a year ago, but at 1.69%, it suggests that there is still little fear of inflation in the bond market.

(For the week ended May 10, 2013.)

Another up week pushed out the boundaries for major stock indexes. Most benchmarks closed the week in record or near-record territory, showing accumulated gains of 14% or more for 2013. Earnings remain strong and the economic news was generally good. But some analysts are concerned by the pace of recent gains. They fear that when prices rise as strongly as they have recently, the market tends to be more sensitive to disappointments. As a result, even relatively minor cases of missed expectations could have significant effects.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Spending Rebounds Consumer activity was strong in April. Retail spending was higher (up 4.7% over April 2012 by one measure). Not only has the unemployment rate declined (albeit slowly), the pace of firing also declined (as shown by the reduction in first time claims for unemployment insurance).

Housing Healing Healthful Home prices are rising, according to Core Logic (1.9% from February to March and 10.5% from March 2012 to March 2013). Meanwhile, foreclosures are declining (4% from March to April and 23% from April 2012 to April 2013), according to RealtyTrac. The price gain was the biggest since March 2006. The foreclosure rate was a 74-month low

Treasury Prices Slip The benchmark 10-year Treasury yield increased to its highest level in six weeks, 1.9%, last week. That’s up from 1.75% the week before. The market value of a bond declines when the market interest rate increases. The spread between fixed-rate Treasuries and Treasury Inflation-Protected Securities narrowed during the week, which suggests the market has little fear of inflation.

(For the week ended May 3, 2013.)

Economic winds again drove the stock market this week. Early-week fears of a domestic slow-down and Europe’s continued struggles caused listless and volatile trading while investors speculated about future stimulus moves. But compelling good news about unemployment and job creation on Thursday and Friday prompted major indexes to new heights on the crest of back-to-back 1% daily gains. Further boosts came from good news on home prices and a reduction in oil imports. Apple and General Motors got nods from investors – GM for beating earnings estimates and reducing its losses in Europe, Apple for issuing $17 billion in bonds.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Employment Improvements The headline unemployment rate fell to 7.5% in April, its lowest level in years. There was stronger than expected job growth during the month. In addition, job growth estimates for prior months were revised upward, which means that there is more upward momentum that previously believed.

Home Improvements Home prices jumped 9.3% over the past year as measured by the S&P/Case-Shiller 20-City Composite Home Price Index. This is the ninth consecutive month of year-over-year price increases, after three years of decline.

Treasury Market Update Stronger economic performance did have a depressing effect on Treasury prices. The 10-year Treasury yield increased to 1.75% from 1.68% a week previously. The 10-year Treasury’s spread above inflation-protected bonds–a measure of inflation expectations–slipped 2 points over the past week but was up 13 points above the previous year.

(For the month ended April 30, 2013.)

Major stock indexes closed out the month higher, but not without considerable volatility along the way. When the dust settled, indexes showed strong cumulative gains for the first four months of 2013. What’s more, the S&P 500 and Dow Jones Industrials finished the month in record territory (the Nasdaq Composite, however, is still well below the heyday of the technology bubble). The economy made headlines throughout the month by growing enough to maintain stability but not enough to make any significant dents in unemployment and underemployment. Apple Computer figured prominently in company news. After reaching a peak of more than $700 per share last September, it fell to $385 at mid-month. Then, at month’s end, cash-rich Apple came to the debt market for $17 billion. The bonds were well received and rated AA+, the second-best rating available.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Fundamental update Earnings and dividends were strong performers in the first quarter. As the month drew to a close, nearly 70% of the companies reporting had exceeded analysts’ expectations. Over the past 10 years, an average of 62% reported earnings that exceeded expectations. Overall, first quarter earnings were averaging about 1.5% higher than the comparable numbers from one year ago. Meanwhile, S&P Dow Jones Indices noted that companies increased their dividend rate by $14.5 billion during the first quarter of 2013, a 3.4% increase for the quarter.

Economic update The first estimate on economic performance in 2013 shows a 2.5% real growth rate for the quarter, a less-than-hoped-for outcome. There was much underlying strength in the private sector as consumer spending rose at its fastest pace in two years (3.2% growth, up from 1.8% last quarter) and businesses kept investing, even after they opened their pocketbooks wide in last year’s fourth quarter.

Treasury markets Returns got a boost from declining yields on the Treasury market as bond values rose to account for the yield declines. The benchmark 10-year yield went from 1.86% to 1.67% during the month. The 30-year yield went from 3.08% to 2.88%. Corporate bonds showed similar declines.

(For the week ended April 26, 2013.)

A generally up week closed with a mixed finish as a disappointing report on economic growth turned stock indexes mostly lower after four days of gains. Earlier in the week, hackers took control of the Associated Press’s Twitter account and broadcast fake messages that caused a brief trading panic. Major indexes remain up strongly for the year to date. In company news, Boeing beat earnings estimates as its Dreamliner moved closer to returning to service. And Verizon got a boost from reports that it may move to buy complete control of Verizon Wireless, its joint venture with British telecom giant Vodafone.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Fundamental Update With the first quarter earnings season now in full swing, S&P Capital IQ reported that of the 175 companies having reported EPS results for the first quarter, 120 beat analysts’ estimates, 36 missed tem, and 19 landed on target. This produces a beat-expectations rate of 69%, which is higher than the 10-year average of 62%. Wall Street analysts now expect first quarter 2013 earnings for the S&P 500 to increase 2.97%. Revenue growth is projected to advance at a similar pace of 2.9%.

Economic update The economy grew 2.5% in the first quarter of 2013, which is stronger than the previous quarter but weaker than analysts had expected. Keep in mind that this figure is preliminary, and is sometimes called a flash estimate. Some of the data needed to get a more complete picture of GDP won’t be available for several weeks or more.

Treasury Markets Signs of slower-than-hoped-for growth in the economy helped boost Treasury bond prices during the week, pushing down benchmark yields for longer-term bonds. The widely watched 10-year yield slid six hundredths of a percentage point to 1.67%, from 1.73% the previous week. The 30 year benchmark stood at 2.87% at week’s end, substantially unchanged from the week-earlier reading.

(For the week ended April 19, 2013.)

Stock indexes turned in their poorest week since last fall as major indicators all declined 2% or more. Good first quarter results from Google and other companies could not completely offset the bad news from IBM (which came in below expectations following a 5% drop in revenue) and the continued slide of Apple, which ended the week below $400 per share, a decline of more than 40% from its peak last fall. The price of an ounce of gold hovered all week near its lowest level of 2013.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Economic Update The global economy continues to struggle as even normally fast-growing India and China reported difficulties. China reported first quarter GDP growth of 7.7%, down from 7.9% in the 2012 fourth quarter. India reported relatively high inflation (6.6%), which appears to rule out any stimulus to counter India’s anemic pace of expansion.

Fundamental Update First quarter earnings are averaging about 1.5% higher than the comparable numbers from one year ago. At the beginning of the year, they had expected twice as much growth, but those expectations were scaled back steadily over the past three months.

Treasury Market Update Price rose in the Treasury market as yields fell back toward their historical lows. The benchmark 10-year Treasury yield was 1.70% at week’s end.

(For the week ended April 12, 2013.)

A strong start carried the week solidly higher despite late volatility. So far, 2013′s rising tide has lifted major indexes as much as 13% since the New Year’s tax compromise sparked a relief rally in early January. Major indexes set new records during the week before the pullback. And despite discouraging economic news (on unemployment), the market did finish its worst day (Friday) well above that’s day’s worst levels. Earlier in the week, the first quarter earnings season for S&P 500 companies began with firms such as Alcoa outperforming expectations. Analysts foresee companies reporting relatively modest growth overall, but recent forecasts are generally higher than forecasts for the same period made a month or two ago.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Economic Update The Federal Reserve’s policy-making group (the FOMC) has adopted a more optimistic economic outlook and suggested that the Fed could begin reducing its economic stimulus efforts later in the year. But their announcement came before the latest jobs report suggested that employment weakness was continuing. If there is no improvement in jobs, stimulus efforts could continue into 2014.

Dividends Improve S&P Dow Jones Indices noted that companies increased their dividend rate by $14.5 billion during the first quarter of 2013, a 3.4% increase for the quarter. All 30 companies in the Dow Jones Industrials are now paying dividends, as are 81.2% of those in the S&P 500. That’s a level not seen since November 1999.

Treasury Market Update Treasury prices ended the week more or less where they began. The benchmark 10-year Treasury bond yielded 1.72% at week’s end, the same as a week earlier. The 30-year bond gained a little as its benchmark yield edged down to 2.92% from 3% a week earlier.

Troublesome financial news drove the market lower for much of the week’s action as major stock barometers showed losses of as much as 1.9% on the week’s trading. The drumbeat started Monday with word from the Institute for Supply Management that factory activity was slowing in March as the first quarter drew to a close. It finished Friday with a slower-than-hoped-for dip in the unemployment rate. Best Buy was a big winner on Thursday. The big box electronics chain surged 16% after announcing a new joint marketing program with Samsung.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Unemployment Remains Job growth in March remained slow as employers added just 88,000 jobs. That was only enough to lower the unemployment rate 0.1% to 7.7%. Meanwhile, the euro zone’s statistical agency reported that unemployment across Europe rose to a new record high of 12%, which means there are more than 26 million people without work there.

Cyprus Concerns Recede The U.S. stock market appeared to have been reassured by the recent bailout moves for the troubled Mediterranean island nation. But credit markets were less sanguine as the price of credit default swaps for Cyprus government bonds pointed to a high probability of default.

Treasury Market Update The market value of the benchmark 10-year Treasury bond rose over the week as the indicated market yield fell to 1.69% from 1.87% a week earlier. Rates in the Treasury market generally were little changed from year-ago levels.

(For the quarter ended March 31, 2013.)

2013′s first quarter started with a relief rally and finished with major benchmarks pushing into record territory. In between, there were high points supported by good economic news. But there were also darker moments in the shadows of Europe’s fiscal struggles, domestic political uncertainty, and individual company business struggles. What is more, the pursuit of records by the S&P 500 and Dow Jones Industrials was not mirrored at the United States’ global trading and investment partners. Major global stock benchmarks show downward trends in Europe and Asia for the past two years, even as the U.S. unemployment rate edged lower and domestic inflation remained insignificant.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Politics and Wall Street The federal budget compromise that ushered in the new year sparked a surge in stock trading that had not abated by quarter’s end, even after it passed over the rough spots caused by the budget sequestration battle. The Federal Reserve continued its bond market interventions, policies which were still keeping interest rates at historic lows as the quarter closed.

Company News The stock of airframe builder Boeing posted a strong quarter despite the difficult launch of its latest model, the 787 Dreamliner, which remains grounded due to fear of battery fires. Computer maker Dell remains elevated while investors debate the merits of competing buyout offers. And JPMorgan Chase saw its 2013 climb interrupted by an investigation critical of its trading risk-management practices.

Bond Market Update There was no net change in Treasury bond returns from the beginning of the quarter to the end. The benchmark 10-year bond yield started at 1.86% and finished at 1.87%, suggesting no meaningful change in the bond’s value occurred during the period. A small increase in long-term corporate bond yields (an average of about one-fourth of a percentage point) suggested a small but meaningful decline in typical corporate bond values.

(For the month ended March 31, 2013.)

March came and went like a lion as far as principal U.S. stock market indicators were concerned. The S&P 500 and Dow Jones Industrials both reached new all-time highs during the month as the 2013 rally continued almost unabated. But the United States stands virtually alone in the world in post-2007-crash recovery. Global market indexes such as MSCI’s EAFE and Emerging Markets benchmarks remained well down from their 2007 levels and have been in decline for the past two years. In company news, long-struggling Blackberry turned in a surprisingly strong quarter, Boeing’s Dreamliner battery woes continued, and bellwether technology firm Oracle foretold a rough spot for the tech sector with disappointing results.

Source: Standard & Poor’s. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indexes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Euro Zone Survives The tiny island nation of Cyprus emerged as the latest threat to the integrity of the euro zone in March when a banking crisis there threatened a default that could have sunk Europe’s monetary union. Rich nations finally agreed to subsidize a bailout after Cyprus closed one bank and restructured another. The Cypriot moves had the effect of slashing the value of depositors’ accounts by up to 40%.

Economic Indicators Inflation remained moderate in the face of a significant bump in the price of energy. Core consumer prices rose 2% during the latest 12-month period. Home values appeared to increase across the board according to the latest S&P/Case-Shiller Home Price Index report. And the unemployment rate declined to 7.7%.

Bond Market Update The market for U.S. treasury bonds ended the month more or less where it began. The yield on the 10-year benchmark bond moved up and down in a narrow band, starting the month at 1.85% and finishing at 1.87%. The historically low yields reflect the Federal Reserve’s continued support for economic stimulus.