Monthly Market Monitor - April 2014 Recap

Market Indices1AprilYear-to-Date
S&P 5000.74%2.56%
Russell 30000.12%2.10%
MSCI EAFE1.45%2.12%
MSCI Emerging Markets0.33%-0.10%
Barclays US Aggregate Bond0.84%2.70%
Barclays Municipal1.20%4.56%
Barclays US Corporate High Yield0.63%3.63%

  • Stocks rose fractionally in April, as investors wrestled with earnings and growth prospects.
  • The Ukraine crisis and concerns over reduced Fed stimulus served as market overhangs.
  • Bonds continue to beat stocks on a YTD basis. Treasuries have best returns since January.

Stocks rose for a third month in April, as the Dow Jones Industrial Average closed out the month at a new all-time high, its first this year. The broader S&P 500 Index finished within seven points of its 1,890 April 2nd record high, while the NASDAQ Composite lost 2% to cap its first back-to-back monthly decline since 2012. For most of April, investors were digesting a weaker start to the first quarter earnings season, but improved end-of-month profit reports lifted overall corporate earnings growth forecasts for S&P 500 companies to 3.4% from 0.9% previously estimated. Wall Street also learned that the U.S. economy, hurt by severe winter weather, grew by just 0.1% in the first quarter, down from 2.6% during the fourth quarter. Sentiment was also challenged by further Russian incursions into Ukraine and global concerns over continued withdrawal of Federal Reserve stimulus. On April 30th, the U.S. central bank reduced its monthly bond purchase program by another $10 billion to $45 billion.

Smaller-capitalized stocks underperformed large-caps as the Russell 2000, a proxy for small-cap equities, lost 3.9% in April and fell 2.8% YTD. Mid-cap stocks, as measured by the Russell Mid Cap Index, fell 0.6% during the month, paring its YTD gain to 2.9%. Growth stocks underperformed value last month as the Russell 1000 Growth Index was unchanged, while the Russell 1000 Value Index gained 1%. YTD, the Russell 1000 Value Index is up 4%, while the Russell 1000 Growth Index is up 1.1%.

Seven of the ten major sector groups posted gains in April, led by Energy (+5.2%), Utilities (+4.3%) and Consumer Staples (+2.9%). Financials (-1.5%) and Consumer Discretionary (-1.4%) fell the most last month. Four months into the year, Utilities (+14.8%), Energy (+6%) and Healthcare (+5.3%) are the top performing sectors of 2014. Consumer Discretionary, last year’s best performing sector (up 43.1%), is the only negative sector on a YTD basis, down 4.1%.

Overseas developed markets outperformed the U.S. last month as the MSCI EAFE Index gained 1.5%. Yet year-to-date, the MSCI EAFE Index slightly trailed the U.S., returning 2.1%. Emerging markets, as measured by the MSCI Emerging Markets Index, underperformed the U.S. last month, rising just 0.3% and trimming its YTD loss to 0.1%. The April gain in emerging markets is surprising given tensions in Ukraine which sent Russia’s Micex equity index down 4.6% during the month and losing 13.1% YTD.

Treasuries, as measured by the Barclays U.S. Government Bond Index, returned 0.6% in April, the most since a 1.3% return in January. Treasuries have returned 1.9% so far this year. According to Fed data, commercial banks have increased their holdings of Treasuries by $42B so far this year. U.S. investment grade bonds, as measured by the Barclays U.S. Aggregate Bond Index, returned 0.8% last month, extending YTD gains to 2.7%. The Barclays U.S. Corporate High Yield Index, a proxy for non-investment grade corporate bonds, returned 0.6% in April, extending YTD returns to 3.6%. Municipal Bonds, as measured by the Barclays Municipal Bond Index, gained 1.2% last month, extending YTD gains to 4.6%.

  1. Morningstar Direct (all performance percentages are total return based, which include reinvested dividend, interest)

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