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MPCA Weekly Market Update (June 15, 2015)

| June 15, 2015

The S&P 500 finished up 0.12% for the week, but was limited during its final trading session.  In a surprise move Friday, the International Monetary Fund (IMF) walked away from talks with Greece after the IMF signaled a deep divide in negotiations between creditors and Greece.  In response, the S&P 500 fell 0.69% during Friday’s trading session. 

In another surprise, the House of Representatives dealt the President a blow when it could not pass his trade bill.  Many of President Obama’s key allies, including former Speaker Nancy Pelosi, voted against the bill that would have provided greater assistance to workers harmed by global trade and expanded the authority of the President to negotiate trade pacts with other nations.

Looking at the credit markets, late last week yields fell but are still up strongly over the past month in response to positive economic indicators and news releases during that time.  The U.S. 10-year Treasury bond is yielding nearly 2.4% as of Friday compared to just 2.14% for the week ended May 15th.  Additionally, all eyes will be on the Federal Reserve this week as it meets to determine whether to raise the discount rate or continue leaving it range-bound at 0-0.25%.

The Fed has not tightened monetary policy since 2006 and most anticipate no rate change until this fall.  In advance of the Federal Reserve meeting, the IMF declared it does not believe the Fed should raise rates until 2016 as it expects the U.S. economy to grow only 2.5% this year.  The IMF noted that the first quarter of 2015 showed the U.S. economy contracting.

Whether or not the market cares about actual data this week remains to be seen.  For now, all eyes appear to be focused on Athens.  European Central Bank President Mario Draghi said this morning that “the ball lies squarely in the camp of the Greek government to take the necessary steps”.  Stay tuned.