Market Summary – June 21

Fed Chairman Bernanke announced an end to monetary easing within the next 12 months, which caused markets to sell off. The Fed cited growing optimism on the economic outlook for 2014. They project that U.S. unemployment will fall to 6.5%‐6.8% next year from its current 7.6% level. Housing sector strength, growth in household wealth, and improving consumer confidence and spending also contributed to the Fed outlook. The S&P 500 had its largest one‐day loss since November 2011 on Thursday and the 10‐year Treasury yield jumped to 2.53%, as investors exited bonds in anticipation of rising rates. Gold dropped to $1,292 an ounce, its lowest price since 2010. U.S. home resales increased in May to the highest level since late 2009. Existing‐home sales rose 4.2% from April and were 12.9% higher than May 2012.

China reported a weak reading in their initial manufacturing purchasing managers’ index (a drop from 49.2 in May to 48.3 in June), which raised further concerns that the world’s second largest economy is stumbling. China’s banking system experienced an abrupt spike in overnight interbank interest rates, nearly freezing bank‐to‐bank borrowing, as China’s central bank sought to punish speculators and send markets a stern message. The Chinese interbank lending rate jumped to 13.44% on Thursday, up from 7.66% Wednesday, but then dropped back to 8.49% Friday.

The S&P 500 Index dropped ‐2.11% last week, and the DJIA fell ‐1.80%. All ten S&P 500 sectors were negative. Technology (‐1.32%), financials (‐1.60%), and energy (‐1.74%) posted the smallest losses, while telecommunications (‐4.53%), utilities (‐3.17%), and consumer staples (‐2.86%) were the worst performers. Crude oil dropped ‐4.25% to close the week at $93.69.

Market Summary - June 21

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