Weeklymarket: Update

SEPTEMBER 12, 2011
WeeklyMarket e Updat
G e neral M arket News
Equity markets slipped lower during the holiday-shortened week. The S&P 500 Index lost 1.65 percent. President Obamas speech last Thursday nightwhich outlined a new jobs package intended to help stimulate hiringdid little to inspire equity markets. Doubts immediately surfaced about the temporary nature of many of the programs presented, as well as the increased spending required. The 10-year Treasury continued its downward trend, breaking through the 2-percent level last week to reach a new all-time low of 1.90 percent. Meanwhile, performance in the intermediate-term Treasury space has continued strong. The Barclays Capital U.S. Treasury 710 Year Index has returned 1.64 percent month-to-date, with year-to-date performance now at 13.74 percent. We expect that financial stocks will face pressure, as the overseer of Fannie Mae and Freddie Mac has sued 17 banks for misleading the firms into buying bad loans. It also appears that Fannie and Freddie will emerge relatively unscathed for their roles in the mortgage mess, due to already poor financial stability. Technology stocks showed some relative strength last week, and the Nasdaq lost less than 1 percent. This also helped the growth indices outperform the value indices. Municipal bonds performed well for the second straight week; investors appear to feel more comfortable with the debt, keeping the flight-to-safety trade on.
M a rket Index Per formance Data

EQUITIES
Index Week-to-Date % Month-to-Date % Year-to-Date % 12-Month %
S&P 500 Index Nasdaq Composite Dow Jones Industrial Average MSCI EAFE MSCI Emerging Markets Russell 2000
1.65% 0.48% 2.18% 2.22% 0.69% 1.35%
5.26% 4.31% 5.33% 4.49% 1.77% 7.25%
6.94% 6.36% 3.29% 9.85% 10.14% 13.31%
6.63% 11.47% 8.33% 0.28% 2.94% 7.49%
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Week ly Market Update
SEPTEMBER 12, 2011
M a rke t I n d ex Pe r fo rm a n ce Dat a (continued)
FIXED INCOME
Index Month-to-Date (MTD) % Year-to-Date (YTD) % 12-Month %
U.S. Aggregate U.S. Treasury U.S. Mortgage-Backed Securities Municipal Bond U.S. Treasury: U.S. TIPS
0.95% 1.35% 0.49% 0.86% 1.60%
6.88% 8.42% 5.64% 8.21% 12.63%
6.49% 6.96% 5.95% 4.02% 13.39%
What to Lo ok For ward to

After a month of economic woes, inflation worries have lessened. Consumer Prices are expected to have risen just 0.2 percent in August, while Producer Prices actually may have fallen 0.1 percent. This decline could be a concern, but with Producer Prices ex Food and Energy expected to have risen 0.2 percent, worries about deflation might be premature. Slower price increases in food and oil may even be somewhat stimulative to growth. Despite the dip in consumer confidence, many analysts believe that Advance Retail Sales may have been slightly positive, up 0.2 percent, in August. Continued consumer spending will be key to avoiding a second recession; a positive number here could be cheered by market participants. Expectations for manufacturing indices are mixed. Unsurprisingly, Industrial Production is expected to have slowed in August, rising just 0.1 percent after increasing 0.9 percent in July. The Empire and Philadelphia Fed Manufacturing indices are expected to improve somewhat but remain negative for September. Overall, consensus is painting a reasonably moderate picture, given the weakness weve seen recently in the manufacturing sector. The University of Michigan Consumer Confidence reading is anticipated to rise to 56.5 from 55.7. This is still quite low, but it would represent some improvement in outlook.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasurys daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS. The Barclays Capital 710 Year Treasury Index measures the performance of intermediateterm U.S. Treasury securities maturing between seven and ten years. Rev. 9/11. Authored by the Investment Research team at Commonwealth Financial Network. Commonwealth Financial Network
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SEPTEMBER 12, 2011

M a rket Index Per formance Data

1.65% 0.48% 2.18% 2.22% 0.69% 1.35%

5.26% 4.31% 5.33% 4.49% 1.77% 7.25%

6.94% 6.36% 3.29% 9.85% 10.14% 13.31%

6.63% 11.47% 8.33% 0.28% 2.94% 7.49%

Week ly Market Update

SEPTEMBER 12, 2011

M a rke t I n d ex Pe r fo rm a n ce Dat a (continued)

0.95% 1.35% 0.49% 0.86% 1.60%

6.88% 8.42% 5.64% 8.21% 12.63%

6.49% 6.96% 5.95% 4.02% 13.39%

What to Lo ok For ward to

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