- The major market indices were higher this week. The Dow Jones Industrial Index (1) rose 2.06 percent. The S&P 500 Stock Index (2) advanced 2.77 percent, while the Nasdaq Composite (3) finished 4.85 percent higher.
- Barra Growth (4) outperformed Barra Value (5) as Barra Value finished 2.22 percent higher while Barra Growth rose 3.31 percent. The Russell 2000 (6) closed the week with a gain of 4.94 percent.
- The Hang Seng Composite (7) finished higher by 0.54 percent; Taiwan (8) gained 2.86 percent, and the Kospi (9) advanced 2.09 percent.
- The 10-year Treasury bond yield closed at 3.80 percent, up 31 basis points for the week.
Domestic Equity Market
The figure above shows the performance of each sector in the S&P500 Index, for the four trading days through Thursday at 11:00 AM CT. All ten of the sectors had a positive return. The best-performing sector was materials, up 4.2 percent. Other top-performing sectors include technology and energy. Utilities, healthcare and industrials were the underperformers.
U.S. Steel Corp. was the best-performing stock within the materials sector, up 15 percent. Other outperformers in the sector were Titanium Metals Corp, Alcoa Inc, AK Steel, and Allegheny Technologies Inc.
Strength
- As of 11:00 AM CT Thursday the best performing group for the holiday-shortened week was the healthcare facilities group, up 12.6 percent, led by its single member, Tenet Healthcare Corp. The hospital industry is expected to benefit if healthcare reform passes and expands insurance coverage. Also, a brokerage firm upgraded Tenet stock, saying that the company should continue to improve its margins and increase its inpatient admissions.
- Five of the top-ten performing groups were in the materials sector (aluminum, steel, coal & consumable fuel, construction materials and diversified metals & mining). This strength appears to be due to increasing investor confidence that materials-related groups will benefit from the strengthening global economy. These four groups were up in a range of 7.3-11.9 percent.
- The electric manufacturing services group outperformed, rising 11 percent, led by Jabil Circuit Inc. The contract manufacturer of electronic products reported first fiscal quarter earnings above the consensus forecast and provided a solid forecast for its second fiscal quarter.
Weakness
- The diversified supply services group was the worst-performing group, down 4.7 percent. The group was led by Cintas Corp., a supplier of uniforms and other supplies to corporations reported second fiscal quarter earnings below the analyst consensus estimate. The company’s results have been impacted negatively by the job losses in the U.S. economy. The company also said its third quarter is traditionally its most challenging and it expects customer holiday closures will be longer and more widespread than they have been in recent years. For those reasons, the company believes current analyst expectations for Cintas revenue and earnings are too optimistic.
- The casino & gaming group was the second-worst performing group, losing 1.6 percent. The group was led by International Game Technology. A recent article on Barrons.com pointed out that the company’s chairman and chief executive officer had recently sold some of his stock in the company.
Opportunity
- There may be an opportunity for gain in mergers & acquisition (M&A) transactions in 2009 and 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.
