uploads///Price Movement in the VFINX and the SPY

Why Did US Stock Indices Rise?


Nov. 20 2020, Updated 2:11 p.m. ET

US stock indices rose

The three US equity indices that we review in this weekly series rose slightly from May 3 to May 10, 2016, as oil prices jumped, US corporates reported solid earnings, and the Japanese yen fell. Higher crude prices resulted in a rally in energy stocks (RDS.A) (XOM) (CVX). The US stock market rallied after shares of Amazon.com (AMZN) jumped. An analyst raised its price target to $1,000. Currently, it’s trading at $703.1. The S&P 500 also got support from the shares of US pharmaceutical company Allergan Plc (AGN). It reported solid quarterly earnings.

The equity market also rallied as weak global economic data, especially from China and Europe, almost confirmed that the Fed may not raise interest rates in the June Federal Open Market Committee meeting.

From May 3 to May 10, the S&P 500 index, tracked by the Vanguard 500 Index Fund Investor Class (VFINX), rose 1.1%. The Dow Jones Industrial Average (DJIA) rose 1.0% and the NASDAQ rose 0.1%. The S&P 500 index is also tracked by the SPDR S&P 500 ETF (SPY). SPY was up by 1.1% for the same period.

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High-grade bond market

Treasury yields fell across the yield curve last week after the US Department of Labor reported that the economy added fewer jobs in April. The added jobs were below expectations. It raised concerns about economic growth. The possibility of a rate hike in June’s meeting becomes grim after weak jobs report data. To learn more about the Treasury bond market, read Treasuries Rise: Weaker Jobs Numbers Mean a Bearish Outlook.

Meanwhile, investment-grade bond yields take cues from the Treasury markets. They also fell after the European Commission trimmed its inflation forecast for 2016. Also, China’s foreign trade slowed down more than expected. Weak international data indicates that the global slowdown gripped most markets in the world. To learn more about the high-grade bond market, read US high-grade bonds issuance gained traction amid lower yields in Europe.

Junk bonds

Junk bond yields rose 21 basis points week-over-week and ended at 7.8% on May 6, 2016. Due to a rise in yields, the price of mutual funds and ETFs investing in junk bonds like the American Funds American High-Income Trust – Class A (AHITX), the T. Rowe Price High Yield Fund – Advisor Class (PAHIX), the SPDR Barclays Capital High Yield Bond ETF (JNK), and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG) fell in the week ending May 6.

This series will cover the developments in the primary and secondary markets for high-yield debt and leveraged loans. We’ll start with developments in high-yield primary market issuance.


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