Roundup: Index Summary and U.S. Markets

Index Summary

• The major market indices were mixed this week. The Dow Jones Industrial Index fell 0.87 percent. The S&P 500 Stock Index declined 1.01 percent, while the Nasdaq Composite finished 0.72 percent lower.
• Barra Growth outperformed Barra Value as Barra Value finished 1.08 percent lower while Barra Growth fell 0.94 percent. The Russell 2000 closed the week with a loss of 1.37 percent.
• The Hang Seng Composite finished higher by 1.98 percent, Taiwan gained 2.82 percent, and the Kospi advanced 0.03 percent.
• The 10-year Treasury bond yield closed at 3.84 percent, up 5 basis points for the week.

Domestic Equity Market

The figure above shows the performance of each sector in the S&P 500 Index for this holiday-shortened week. All sectors showed negative returns. The best-performing sector was technology, down 0.52 percent. Other better-performing sectors included telecom and consumer staples. Under-performing sectors were industrials, utilities, and consumer discretion.

Within the technology sector, the best-performing stock was NVIDIA Corp, up 3.3 percent. The other top-five outperforming stocks in the sector were Agilent Technologies Inc, Salesforce.Com Inc, FLIR Systems Inc, and Visa Inc.

Strengths

• The special consumer services group was the best-performing group for the week, up 4.8 percent, led by its single member, H&R Block Inc. A brokerage firm upgraded the stock to “outperform,” saying that the company’s largest competitor faces challenges that could allow H&R Block to gain market share. The brokerage report was highlighted in two prominent business/investment publications.
• The electronic equipment & instrument group was the second-best performer, rising 2.1 percent. Its largest member, Agilent Technologies Inc was featured in an online financial blog. The other member of the group, FLIR Systems Inc, also rose. It announced an acquisition this week.
• The investment banking & brokerage group was the third-best performer, gaining 1.5 percent, led by its largest member, Goldman Sachs Group Inc. A brokerage analyst cited several reasons why it should be a top pick for 2010 including an expected pick-up in M&A and IPO activity, an attractive valuation and lower compensation expenses.

Weaknesses

• The industrial REITS (real estate investment trust) group was the worst-performing group, down 6.9 percent, led by its single member ProLogis. The group was up 8.8 percent the prior week, so profit-taking was likely a factor in this week’s decline.
• The trucking group was the second-worst performing group, dropping 5.3 percent, led by its single member, Ryder System Inc. The Chairman of the Board filed this month to sell 30,000 shares of the company’s stock.

Opportunities

• 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.

Threats

• Should investors’ expectations for an improving economy not come to fruition on a reasonable time frame, it could be a threat to stock prices.