Index Summary and U.S. Equity Markets Diary (4/10/2010)

Index Summary

• The major market indices were higher this week. The Dow Jones Industrial Index rose 0.64 percent. The S&P 500 Stock Index advanced 1.38 percent, while the Nasdaq Composite finished 2.14 percent higher.
• Barra Growth underperformed Barra Value as Barra Value finished 1.52 percent higher while Barra Growth gained 1.23 percent. The Russell 2000 closed the week with a gain of 2.77 percent.
• The Hang Seng Composite finished higher by 2.70 percent; Taiwan was up 0.99 percent and the Kospi advanced 0.31 percent.
• The 10-year Treasury bond yield closed at 3.88 percent, up 1 basis point for the week.

Domestic Equity Market Diary (4/10/2010)

The figure above shows the performance of each sector in the S&P 500 index for the week. The best-performing sector was financials, up 2.8 percent. Other better-performing sectors included consumer discretion and energy. Underperforming sectors included healthcare, consumer staples, and telecom services.

Within the financials sector the best-performing stock was American International Group Inc, up 11.8 percent. Other top-five financial stocks were Regions Financial Corp, Marshall & Ilsley Corp, Comerica Inc, and Zions Bancorporation.

Strengths

• The photographic products group was the best-performing group for the week, up 23 percent, led by its single member, Eastman Kodak Co. One trading blog included Kodak on a list of stocks with relatively heavy short interest as a percent of the stock’s float, implying that the stock might be increasing in price because of short covering.
• The motorcycle manufacturer group outperformed, rising 16 percent. A brokerage report on Harley Davidson Inc. reiterated the brokerage firm’s “outperform” rating on the stock and raised the target price for the stock, citing a meaningful improvement in sales in March.
• The casino & gaming group outperformed, gaining 10 percent. Nevada statewide gambling revenue was reported to be up almost 14 percent in February over the same month last year.

Weaknesses

• The auto parts & equipment group was the worst performer, losing 4 percent, led by its single member, Johnson Controls Inc. The company announced the release of its latest Global Reporting Initiative online sustainability report
• The managed healthcare group underperformed, down 4 percent. On Friday Aetna Inc. said that it is suspending marketing to and enrollment of new members to its Medicare plans for the elderly because of sanctions imposed by the U.S. government. Aetna, together with Humana Inc. and UnitedHealth Group Inc., two of the larger providers of Medicare Advantage plans, sold off on Friday.
• The agricultural products group declined 3 percent. A brokerage firm reduced its earnings estimates and price target on the stock of Archer Daniels Midland Co., citing concern that continued weakness in ethanol could impact earnings and the share price.

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.