Economic Update:

• Featured by an unusual correction in the manufacturing ISM, economic data for the week was decent.  The more dramatic news came from Europe, where the ECB provided additional easing and elected a new ‘negative interest rate’ policy, the first of its kind for a major central bank.
• Equity markets generally rose across the board on positive economic data in the U.S. and ECB easing; this was coincident with higher U.S. interest rates.

Stocks experienced a bullish week and new S&P 500 highs due to better economic data, positive payrolls and the ECB easing all noted above.  Domestically, industrials and financials led from a sector standpoint, while telecom lagged as the only negative performing area.  Higher-beta small-caps beat large-caps, in keeping with the stronger sentiment.  That pulled small-caps out of their negative year-to-date position.

Outside the U.S., Europe and Japan were up roughly 2%, while the U.K. trailed with gains of just above a half-percent.  The ECB decision obviously played a role, as leading nations were some of those on the periphery.  A weakening of German inflation by a half-percent to under 1% buoyed hopes for ECB action, which happened by later in the week.  Stocks rallied in response.  Emerging markets fared even better, led by continued recovery gains in India on governmental optimism, as well as Thailand and Russia, with lessened concerns.  Australia and New Zealand were the laggards, as higher capital requirements for banks in the former caused some concern.

U.S. bond prices were down sharply on the week, as flows moved back towards equities—pushing the 10-Year Treasury back above 2.5%.  Long-term investment grade bonds lost the most ground, while high yield gained on tightened spreads.  Contrary to the U.S., European bonds rose on the ECB announcement, as rates lowered, as did emerging market debt.

Real estate gained across the board, on par or better than global equities—led by European REITs, per the ECB action, as well as U.S. industrial/office and retail, as better economic data would tend to boost prospects.

Commodities were flat on average last week.  Natural gas earned gains in the +5% range as lower storage in the U.S. raised concerns over supply should summer heat up.  Coffee and cotton corrected in a continuation of a recent trend (in coffee, perhaps an overbought condition).  Copper lost several percent and was in the global news as Chinese investigators were reviewing potentially fraudulent warehouse receipts, for which the metal is often used as collateral.