- The major market indices were higher this week. The Dow Jones Industrial Index rose 2.33 percent. The S&P 500 Stock Index advanced 3.10 percent, while the Nasdaq Composite finished 3.94 percent higher.
- Barra Growth outperformed Barra Value as Barra Value finished 2.96 percent higher while Barra Growth gained 3.24 percent. The Russell 2000 closed the week with a gain of 5.96 percent.
- The Hang Seng Composite finished higher by 1.22 percent, Taiwan was up 3.10 percent and the Kospi advanced 2.51 percent.
- The 10-year Treasury bond yield closed at 3.68 percent, up 9 basis points for the week.
Domestic Equity Market
The figure shows the performance of each sector in the S&P 500 Index for the week. The best-performing sector was materials, up 5.3 percent. Other better-performing sectors included consumer discretion and financials. Under-performing sectors were telecom services, healthcare and consumer staples.
Within the materials sector the best-performing stock was Titanium Metals Corp., up 16.5 percent. The other top-five performers included AK Steel, Allegheny Technologies, U.S. Steel Corp. and Sigma-Aldrich Corp.
Strengths
- The oil & gas refining/marketing group was the best-performing group for the week, up 12 percent. Gasoline prices have been rising and refining margins increased by around 17 percent this week. Also, Friday’s better-than-expected jobs report probably raised some investors’ hopes for stronger demand of refined products.
- The automobile manufacturer group was the second-best performer, up 11 percent. Ford Motor Co. reported that its total U.S. vehicle sales were up 43 percent year-over-year in February. It also estimated its U.S. market share at 17 percent, up 3 percentage points versus a year ago. Ford is being helped by Toyota’s difficulties.
- The steel group outperformed, gaining 9 percent. AK Steel was the subject of a buyout rumor this week. Also this week AK Steel said that it would hike prices on carbon steel by $40 per ton. Titanium Metals Corporation’s CEO said that the company anticipates the 787 aircraft will accelerate production rates throughout the commercial aerospace supply chain during 2010 and continue over the next 2-3 years.
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Weaknesses
- The specialty stores group was the worst performer, down 6 percent, led by Staples Inc. After reporting its fourth quarter profit this week, the largest U.S. office supply retailer forecast full-year 2010 earnings below the analyst consensus estimate, disappointing investors. A major brokerage house analyst downgraded the stock to “neutral” from “buy.”
- The special consumer service group was the second-worst performer, falling 3 percent, led by its single member, H&R Block Inc. On February 24, the company announced that total tax returns prepared through February 15 were down 6.3 percent and, as a result, the company’s previously announced guidance would not be met.
- The thrifts & mortgage group underperformed, losing 1 percent. Hudson City Bancorp Inc., which announced that it submitted an application to convert from a federally chartered stock savings bank to a national bank.
Opportunities
- There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010. Corporate liquidity is high with over ten percent of corporate assets in cash and short-term investments, a record high for at least the last forty years, thereby providing the means to pursue acquisitions.
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.
- As governments around the world begin to wind down the monetary and fiscal stimulus programs put in place during the economic crisis, it will likely present a headwind for stocks.
