Index Summary
- The major market indices were higher this week. The Dow Jones Industrial Index rose 0.79 percent. The S&P 500 Stock Index advanced 1.06 percent, while the Nasdaq Composite finished 0.22 percent higher.
- Barra Growth outperformed Barra Value as Barra Value finished 0.99 percent higher while Barra Growth gained 1.13 percent. The Russell 2000 closed the week with a gain of 0.72 percent.
- The Hang Seng Composite finished higher by 3.71 percent, Taiwan was up 2.23 percent, and the Kospi (9) advanced 1.82 percent.
- The 10-year Treasury bond yield closed at 3.87 percent, down 2 basis points for the week.
U.S. Equity Market Diary (4/5/2010)
The figure above shows the performance of each sector in the S&P 500 Index for the holiday-shortened week. The best-performing sector was energy, up 3.8 percent. Other better-performing sectors included materials and utilities. Underperforming sectors included consumer discretion, technology, and financials.
Within the energy sector the best-performing stock was Pioneer Natural, up 11.9 percent. Other top-five-performing stocks in the sector were Denbury Resources Inc., Rowan Companies Inc., Southwestern Energy Co., and Noble Energy Inc.
Strengths
- The real estate services group was the best-performing group for this holiday-shortened week, up 11 percent, led by its single member, CB Richard Ellis Group Inc. The shares of this provider of commercial real estate leasing and sales services was upgraded to “Conviction Buy” from “Neutral” by a major brokerage firm, citing higher-than-expected U.S. transaction commissions in 2011.
- The diversified metals & mining group was the second-best performing group, gaining 9 percent, led by its single member, Freeport-McMoRan Copper & Gold Inc. The third-best performer was the gold group, gaining 7 percent, led by its single member, Newmont Mining Corp. The prices of copper and gold both rose during the week.
- Five energy-related groups were in the top 10 performers (oil & gas drillers, oil & gas exploration & production, oil & gas equipment & services, gas utilities and independent power producers & energy traders), up from 4 percent to 7 percent. The prices of crude oil and natural gas both increased during the week.
Weaknesses
- The automobile manufacturer group was the worst-performing group, down 9 percent, led by its single member, Ford Motor Co. The UAW VEBA trust sold Ford warrants to purchase 362 million common shares of Ford. Some of the pressure on the stock was likely due to short sales of common shares by purchasers of the warrants who wanted to remain in a more neutral position.
- The homebuilding group underperformed, falling 5 percent. The S&P/Case-Shiller home price index declined 0.7 percent in January on a year-over-year basis. It rose a seasonally-adjusted 0.3 percent vs. December. In the prior week the Commerce Department announced that new-home sales hit a record low in February.
- The IT consulting & services group underperformed, down 3 percent, driven by SAIC Inc. The provider of technical services, primarily to U.S. Government entities, reported fourth-quarter results below the consensus estimate, and it lowered its outlook for the current fiscal year, saying its pace of new contract awards has been slower than expected.
Opportunities
- There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010. Corporate liquidity is high, 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.
