- The major market indices were lower this week. The Dow Jones Industrial Index fell 0.55 percent. The S&P 500 Stock Index dropped 0.72 percent, while the Nasdaq Composite finished 0.29 percent lower.
- Barra Growth outperformed Barra Value as Barra Value finished 1.13 percent lower while Barra Growth fell 0.29 percent. The Russell 2000 closed the week with a loss of 1.50 percent.
- The Hang Seng Composite finished lower by 1.73 percent, Taiwan lost 5.53 percent, and the KOSPI declined 2.20 percent.
- The 10-year Treasury bond yield closed at 3.57 percent, down 7 basis points for the week.
Domestic Equity Market
The figure above shows the performance of each sector in the S&P 500 Index for the week. The best-performing sector was materials, up 0.83 percent. Other top-performing sectors include technology and energy. Underperforming sectors were utilities, healthcare and financials.
Within the materials sector the best-performing stock was Airgas Inc., up 44 percent, on news that is was subject of a takeover offer. The other top-five performers in materials were Newmont Mining Corp., Freeport-McMoRan Copper & Gold Inc., Cliffs Natural Resources Inc., and FMC Corp.
Strengths
- The gold group was the best-performing group for the week, up 8 percent, led by its only member Newmont Mining Corp.
- The electrical component & equipment group was the second-best performing group, up 6 percent, driven by its largest member, Emerson Electric Co. The company reported first quarter earnings and issued full-year earnings guidance above the consensus.
- The home entertainment software group was the third-best performing group, up 6 percent. Electronic Arts Inc. announced late on Friday of last week that its new game Mass Effect 2 had sold 2 million copies in its first week and received an average quality score of 96 percent, making it the highest-rated game ever produced by the company.
Weaknesses
- The trucking group was the weekâs worst performer, dropping 9 percent. Ryder System Inc. reported a fourth quarter profit below street expectations and issued 2010 earnings guidance below the consensus estimate. In addition, the earnings release referred to âthe challenges of the prolonged multi-year freight recession which extended through the fourth quarter.â
- The healthcare facilities group was the second-worst performer, down 8 percent. Tenet Healthcare Corp. had been expected to benefit from the proposed healthcare legislation but its enactment is uncertain at this time.
- The regional banks group underperformed, down 5 percent for the week. There was investor concern that some of these banks would have to raise additional equity money in order to repay the government loans.
Opportunities
- There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010.
- The recent decline in the market could be an opportunity to initiate positions in selected stocks with good fundamentals which had previously been considered to be overvalued.
Threats
- Should investorsâ expectations for an improving economy not come to fruition on a reasonable timeframe, it could be a threat to stock prices.
- As governments around the world begin to wind down the monetary and fiscal stimulus programs put in place during the economic crisis, this will likely present a headwind for stocks.
