U.S. Equity Market Radar (April 23, 2012)
The S&P 500 Index rose 0.60 percent this week, bouncing back from the biggest weekly drop of the year last week. Defensive areas led as utilities, staples and health care were the week’s leaders. This was the first week of significant quarterly earnings reports. So far the results have been mixed, with weak results from leading sectors such as technology and consumer discretion.
Strengths
- After a long, steady run this year, the market is witnessing a rotation as defensive areas not only outperformed this week but also so far in April.
- Gilead Sciences was the best performer in the S&P 500 this week, rising by more than 12 percent as the company announced very strong results for a new hepatitis C treatment.
- Other strong performers for the week include eBay, Walgreen’s and Travelers.
Weaknesses
- The technology sector was the worst performer as bellwether names such as Apple, Qualcomm and Google were all down sharply for the week.
- Genworth Financial was the worst performer in the S&P 500 this week as the company postponed plans for an IPO of an Australian unit after the subsidiary experienced “elevated” losses.
- Other weak performers for the week included SanDisk, Chesapeake Energy and Sprint Nextel.
Opportunity
- We are right in the middle of earnings season with key reports from numerous benchmark heavyweights including Apple, Caterpillar and Starbucks. The early pattern has been for the leaders to falter, but some strong reports could change that tune.
Threat
- After peaking early this month, the S&P 500 has struggled in recent weeks and appears to be in a normal correction phase. Sentiment appears to have run ahead of fundamentals, with earnings season thus far having been a “sell-the-news” event.
