U.S. Equity Market Cheat Sheet (August 2, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. All ten sectors declined. The best-performing sector for the week was utilities which decreased 2.13 percent. Other top-three sectors were consumer staples and technology. Industrials was the worst performer, down 6.01 percent. Other bottom-three performers were materials and energy.
Within the utility sector, the best-performing stock was Exelon which rose 0.85 percent. Other top-five performers were FirstEnergy, Public Service Enterprise, Constellation Energy, and PPL.
Strengths
- The healthcare technology group was the best-performing group for the week, up 2 percent, led by its single member, Cerner. The firm reported second-quarter earnings and revenue in excess of the analystsâ consensus estimates.
- The internet retail group outperformed, gaining 2 percent on strength in the stock of Amazon. and Expedia. Both companies reported quarterly earnings and revenues above the consensus estimates.
- Two energy-related groups were among the top-ten outperformers. Oil & gas refining & marketing and oil & gas storage & transportation finished in third and fourth place, respectively. The former gained a fraction of one percent, and the latter lost a fraction of one percent.
Weaknesses
- The healthcare facilities group was the worst-performing group, losing 11 percent on weakness in the stock of its single member, Tenet Healthcare. The weakness was probably related to earnings reports this week from two other hospital companies. HCA Holdings reported earnings and revenue below the consensus estimates. Health Management Associates beat the earnings consensus but revenue was below the consensus.
- The electrical components & equipment group fell 10 percent, led down by its largest member, Emerson Electric. In a regulatory filing the company warned that it had seen a definite weakening of general business activity in June and July, and while industrial-related businesses are still strong, the company expects eventual softening due to the generally poor economic environment.
- The tires & rubber group underperformed, down 10 percent, led by its single member, Goodyear Tire & Rubber. The company reported second-quarter earnings and revenue well in excess of the consensus estimates, but the stock sold off after the company warned of increasing raw material costs and uncertain economic conditions for the second half of the year.
Opportunities
- There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.
Threats
- Failure to resolve the federal budget issue creates uncertainty, which is not helpful for markets.
