U.S. equity markets ended the first half of 2014 up. The S&P 500 year-to-date was up 6.05%. The Dow Jones Industrial Average has fallen behind the S&P 500, up only 1.51% year-to-date.
In June the S&P 500 was up 1.90% while the Dow Jones Industrial Average gained 0.65%. Ongoing economic factors continued to help equity markets finish higher for the month. In June the Bureau of Labor Statistics reported an increase in nonfarm payrolls of 217,000 and no change in the unemployment rate which remained at 6.3%. Inflation moved towards the Federal Reserve’s target rate of 2% according to the June PCE Index data report which stated a year-over-year inflation rate of 1.8%.
The Federal Open Market Committee continued to taper its quantitative easing program decreasing asset purchases of agency mortgage-backed securities by $5 billion and longer-term Treasury securities by $5 billion. As the taper continues to decrease overall asset purchases the focus has turned to the FOMC’s projections and policy decisions on the federal funds rate which continues to remain at 0% - 0.25%.
The first quarter U.S. gross domestic product (GDP) measure was released by the Bureau of Economic Analysis (BEA) on June 25. The BEA reported GDP at an annual rate of -2.9% for the first quarter. The report was below economists’ consensus of -1.8%.
In June equity markets were also affected by the Russell Index rebalancings which take place once a year. On Friday, June 27 Russell Indices, namely the Russell 1000 and Russell 2000, were rebalanced to reflect market capitalization limits. Trading volume was higher and market indexes were slightly higher with the S&P 500 up 0.19% and the Dow Jones Industrial Average up 0.03% on June 27. The Russell 2000 was up 0.74% and the Russell 1000 was up 0.22%.
Overall in June markets reacted positively to the month’s economic data releases and news combining for increased returns in the first half of the year. The S&P 500’s year-to-date gains were led mainly by the Utilities and Energy sectors. Meanwhile Industrials stock Caterpillar (CAT) continues to lead in the Dow Jones Industrial Average with Intel (INTC) and Microsoft (MSFT) also showing strong returns year-to-date.