U.S. Equity Market Radar (June 4, 2012)
The S&P 500 Index fell 3.02 percent this week as the global economy appears very fragile. Global economic data disappointed and weak employment data here in the U.S. drove the market sharply lower on Friday. Traditional defensive areas such as utilities, telecommunication services and consumer staples were the best performers, while energy, financials and industrials all fell by more than 4 percent.
Strengths
- The utilities sector was essentially flat, in a very rough week for the market with Pepco Holdings, Duke Energy and Public Service Enterprises among the best performers.
- The telecom services sector was not far behind, posting modest weekly losses. AT&T was able to scrape out a modest gain this week, helping the group outperform.
- The best individual stock performer this week was Newmont Mining which rose 3.4 percent as speculation grew that the Federal Reserve would implement additional monetary easing measures in response to the weakening economy.
Weaknesses
- The energy sector was hit hard this week as oil prices fell by more than 8 percent. Cabot Oil & Gas, WPX Energy and Range Resources all fell by more than 11 percent.
- Financials were also hit hard this week on a combination of concerns, such as European banking problems affecting U.S. institutions and extremely low interest rates negatively affecting the life insurers. MetLife and Lincoln National Corp. were the worst performers in the sector with both stocks falling by about 9 percent.
- First Solar was the worst performer in the S&P 500 this week falling 17.2 percent, continuing a dismal run as the stock has fallen 65 percent this year.
Opportunity
- For the third week in a row gold stocks and airlines were among the best performers. Gold stocks were driven by the potential for more quantitative easing from the Fed while airlines are being positively impacted by lower oil prices.
- While much of the news this week was negative the silver lining is that this weakness will likely elicit a response from global policy makers. Government policy actions are often a precursor to change in the financial markets and should be monitored closely.
Threat
- Stresses continue to build in Europe and missteps by policy makers could negatively impact the markets.
