U.S. stocks enjoyed strong gains in the third quarter. Buoyed by hopes for continued monetary stimulus and a rebound in the global economy, investors bid up stocks despite slowing profit growth. The Federal Reserve played a strong role in bolstering sentiment in the third quarter. Indeed, quelling fears of an early taper, the Fed surprised most observers by deciding to delay tapering its purchases of long-term securities, which has helped limit the rise in long-term rates as the economy has improved. However, as the period ended, a showdown over the budget ensued, and rankling over the debt ceiling loomed. Most of the major stock indexes moved into record territory before pulling back toward the end of the period amid concerns about the underlying strength of the economy and the growing probability of an October 1 federal government shutdown.
The Extended Equity Market Index Fund returned 10.35% in the quarter compared with 10.15% for the S&P Completion Index and 8.38% for the Lipper Mid-Cap Core Funds Index. For the 12 months ended September 30, 2013, the fund returned 31.93% versus 31.34% for the S&P Completion Index and 28.32% for the Lipper Mid-Cap Core Funds Index. The fund's average annual total returns were 31.93%, 13.39%, and 10.84% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.44% as of its fiscal year ended December 31, 2012.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Extended Equity Market Index Fund charges a 0.5%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
The portfolio offers investors exposure to small- and mid-cap U.S. stocks by seeking to track the S&P Completion Index. Health care was the best performer in the index in the quarter, followed by energy and information technology. Industrials and business services, consumer discretionary, and telecommunication services were also especially good performers. Materials and consumer staples were in line with the index, while financials and utilities provided more modest returns.
While monetary policy has always played an important role in driving markets, recent months have seen investors paying exceptional attention to signals coming from the central bank. T. Rowe Price managers note that, as the Fed eventually gets closer to winding down its stimulus, fundamental factors, such as corporate earnings and cash flow, should become more important. They also note that unemployment has declined sharply and continues to, housing prices and sales have rebounded, and investor sentiment improved as corporate earnings recovered