- The major market indices were mixed this week. The Dow Jones Industrial Index (1) fell 1.36 percent. The S&P 500 Stock Index (2) declined 0.36 percent, while the Nasdaq Composite (3) finished 0.98 percent higher.
- Barra Growth (4) outperformed Barra Value (5) as Barra Value finished 0.54 percent lower while Barra Growth fell 0.21 percent. The Russell 2000 (6) closed the week with a gain of 1.70 percent.
- The Hang Seng Composite (7) finished lower by 3.86 percent; Taiwan (8) lost 0.53 percent, and the Kospi (9) declined 0.60 percent.
- The 10-year Treasury bond yield closed at 3.54 percent, down 1 basis point for the week.
Domestic Equity Market
For the five trading days through Thursday, the table above shows the performance of each sector in the S&P 500 Index. The best-performing sector was utilities, up 0.7 percent, followed by consumer discretion and industrials. The worst-performing sectors were telecom services, financials and consumer staples.
Within the utilities sector, the best-performing stock was AES Corp., up 8.1 percent. The other top five outperforming stocks in the sector were Questar Corp., Constellation Energy Group Inc., Allegheny Energy Inc., and EQT Corp.
Strengths
- The construction & engineering group was the best-performing group, rising 9.6 percent, led by its largest member, Fluor Corp. ConocoPhillips and Peabody Energy Corp. announced approval of a coal-to-natural-gas facility that will take about four years and 1,200 jobs to build. This is the type of project that Fluor might be expected to help construct. Also, a brokerage house analyst was quoted as saying that Fluor stock had been oversold recently
- The oil & gas exploration & production group was the second-best-performing group for the week, up 9.3 percent. Exxon Mobil Corp. agreed to buy XTO Energy Inc. in an all stock transaction valued at $41 billion. News of this transaction drove up the price of XTO Energy and many of the other members in the group.
- The coal & consumable fuels group outperformed, gaining 6.1 percent, led by its largest member, Peabody Energy. The move in this group was likely related to cold weather and the rise in natural gas prices during the week.
Weaknesses
- The computer & electronics retail group was the weakest group, down 7.2 percent, led by its largest member, Best Buy Co. Inc. The stock sold off after the company said its fourth-quarter margins would be lower than expected in the face of price deflation for notebook computers and flat-panel televisions.
- The food distributor group was the second-weakest performer, falling 6.6 percent. Its single member, Sysco Corp., held its annual analyst meeting Monday. A brokerage house analyst wrote that the company outlined a five-year, $900 million “business transformation” project. While this should keep Sysco ahead of competitors, it will present a near-term earnings drag against a backdrop of an already weak operating environment.
- The motorcycle manufacturer group underperformed, losing 6.0 percent, led by its single member, Harley-Davidson Inc. A major brokerage house added the stock to its sell list, saying checks with dealerships indicate retail bike sales declined between 35 percent and 40 percent in October and November due to tighter lending standards at the company’s lending arm and a recall of 110,000 touring and custom bikes.
Opportunity
- There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010.
- The strength in the market since March could be an opportunity to eliminate weaker companies in the portfolio and upgrade to companies with better fundamental outlooks.
Threat
- Should investors’ expectations for an improving economy not come to fruition on a reasonable time frame, it could be a threat to stock prices.
