Stock Market Commentary -

Renewed monetary support by the Federal Reserve and dissipation of fear over tax hikes drove U.S. equity markets to record levels in the first quarter. The S&P 500 rose 10.6%, closing the quarter at a high of 1,569; the S&P 400 Midcap index surged 13.5%; and the Russell 2000 climbed 12.4%. Foreign equities experienced downside volatility on the Cyprus bailout news, which reignited concerns over the Eurozone's economic troubles. The MSCI EAFE Index managed to return 5.3% by quarter-end, but the MSCI Emerging Markets Index fell 1.6%. Value stocks outperformed growth stocks, while all sectors of the U.S. market rose in the first quarter. Defensives led, with Healthcare returning 16% and Consumer Staples rising 14.6%. Technology and Materials lagged, up 4.6% and 4.8%, respectively. The Real Estate sector added another 7%, as measured by the DJ Wilshire REIT Index.

Bond Market Commentary -

Interest rates rose modestly in the first quarter, leading to negative returns in the overall taxable bond market. The yield on the 10-year Treasury increased by 9 basis points to 1.85%, and the 30-year Treasury yield jumped to 3.11%. High-yield bonds had another strong quarter, gaining 2.9%. The 12-month default rate for high-yield bonds has been trending down from already low levels. Following a broad selloff in December 2012, the municipal bond market gained approximately 0.6% in the first quarter of 2013.