U.S. stocks rallied in the first quarter as the recovery picked up despite tighter fiscal policy and fears about a banking sector collapse in Cyprus abated. Rising corporate earnings and the Federal Reserve's ongoing efforts to stimulate growth through its asset purchase plan helped drive the rally, offsetting concerns about the latest flare-up of the eurozone debt crisis in Cyprus. Most indicators showed the U.S. economy getting stronger. Weekly jobless claims and the unemployment rate both fell to multiyear lows, while gauges of manufacturing and service sector activity were generally favorable. Further evidence showed that the housing market had turned a long-awaited corner as home prices, sales, and construction activity all rose. Mid- and small-cap shares outpaced their large-cap counterparts.
The Extended Equity Market Index Fund returned 13.07% in the quarter compared with 12.93% for the S&P Completion Index and 12.37% for the Lipper Mid-Cap Core Funds Index. For the 12 months ended March 31, 2013, the fund returned 17.63% versus 16.91% for the S&P Completion Index and 15.47% for the Lipper Mid-Cap Core Funds Index. The fund's average annual total returns were 17.63%, 8.96%, and 12.40% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.42% as of its fiscal year ended December 31, 2011.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
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.
Benchmark Definitions
The fund offers investors exposure to small- and mid-cap U.S. stocks by seeking to track the S&P Completion Index. Nine out of 10 sectors rose, with most posting double-digit returns. Health care and industrials and business services were the top two gainers, with each sector returning more than 16%. The telecommunications services sector was the sole decliner, giving up 4%. Materials and information technology stocks advanced, but their gains lagged the index's return.
Given the strong rally of recent months, we would not be surprised to see a pullback in the near term. However, many of the risks facing stock investors have eased, aided by the European Central Bank's forceful actions to contain the region's debt crisis and highly accommodative monetary policies around the globe. In the U.S., the economic recovery appears to be gaining traction, while corporate fundamentals remain strong. Near-term risks to domestic growth include mandatory budget cuts under the federal sequester, which will likely dampen economic activity in the coming months. However, we believe that continued resilience in the private sector will help blunt the impact of fiscal tightening.
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