Equity Overview – Domestic Equity Markets

Major stock market indices ended the first quarter of 2015 rather flat, with the S&P 500 up 0.44%, the Dow Jones Average down 0.26%, and the technology heavy Nasdaq up 3.48%. The Nasdaq reached 5000 for the first time since March 2000, outperforming its larger cap counterparts for the first quarter.

The Fed may have indirectly helped mitigate a market decline in stocks and bond prices when it suggested that it might wait longer before raising rates. A slowly improving labor market and a minimal inflation rate has prompted the Fed to consider a longer stance on low rates.

Investors continued to grapple with a strong dollar, which hinders corporate earnings for U.S. companies. With U.S. companies generating over 50% of their revenues from overseas, a strong dollar is starting to weigh on earnings. As the dollar has risen, U.S. products have become more expensive and less competitive internationally, shifting some customers to buying foreign products.

It is highly anticipated by equity analysts that earnings forecasts will be downgraded across all sectors of the equity markets, possibly producing additional volatility in stocks. Historically, though, swings in stock prices due to a stronger dollar have usually been short lived.

In 2014 there were over $500 billion in stock buybacks for companies within the S&P 500. Thus far this year, the pace of buybacks has dramatically decelerated as companies are starting to find better uses for idle capital. Some analysts view this as an optimistic signal for continued capital growth among companies.

Sources: S&P, Dow Jones, Reuters, Bloomberg, Federal Reserve

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