The Dow and S&P 500 finished the week just barely in the red. The Dow Jones Industrial Average was down 0.04% to finish the week at 18,132.70 while the S&P 500 closed at 2,104.50 losing 0.27%.
Meanwhile, during the week the Nasdaq index pushed closer to the 5,000 level finishing the week up 0.15% and closing at 4,963.53. Reaching the 5,000 level will be a significant milestone for the technology index.
The week’s main event was the testimony of Janet Yellen before Congress. On Tuesday and Wednesday Yellen spoke to Congress about the U.S. economic situation and the Federal Reserve’s monetary policy decisions. Yellen reported that employment, inflation and gross domestic product have all showed substantial improvements leading the FOMC toward a likely rate increase in 2015. However, the Fed chairman continued to stress that the FOMC would closely monitor all factors considered and is not in a rush to increase rates in 2015.
During the week, the second estimate of fourth quarter gross domestic product was also released. The second estimate showed gross domestic product increasing at a seasonally adjusted annual rate of 2.2%. At 2.2%, the rate was down 0.4% from the first estimate which showed GDP increasing at a rate of 2.6%.
The lower GDP estimate and cautious tone from the Fed likely led to the week’s lower market values. However, while the Dow and S&P 500 were down for the week the indexes registered strong gains for the month. The S&P 500 reported its highest monthly reading since 2011 at 5.5%. In February the DJIA also reported a gain of 5.63%.
Year to date stocks continue to climb higher. The DJIA has gained 1.74% since the beginning of January and the S&P 500 has gained 2.20%. The DJIA has been led by industrial stock Boeing (BA, Financial) which has gained 22.5% year to date. Healthcare stocks Pfizer (PFE, Financial) and UnitedHealth Group (UNH, Financial) have also showed strong gains for the DJIA up 11.85% and 11.41% respectively for the year. In the S&P 500 the materials sector has led the way posting a year to date return of 5.99%.
Next week the U.S. market will receive reports on the PCE Price Index and U.S. employment both major factors in market valuations and the Fed’s monetary policy decisions. The PCE Price Index is expected to fall approximately 0.4% for the month of January as oil prices continue to drag down the index level. The U.S. employment report is expected to show a monthly increase of 230,000 nonfarm payroll jobs with the unemployment rate edging down to 5.6% from 5.7% in February’s report.
