Index Summary and U.S. Equity Market Diary (4/18/2010)

Index Summary Diary (4/18/2010)

• The major market indices were mixed this week. The Dow Jones Industrial Index rose 0.19 percent. The S&P 500 Stock Index declined 0.19 percent, while the Nasdaq Composite finished 1.11 percent higher.
• Barra Growth outperformed Barra Value as Barra Value finished 0.22 percent lower while Barra Growth fell 0.09 percent. The Russell 2000 closed the week with a gain of 1.66 percent.
• The Hang Seng Composite finished lower by 2.20 percent; Taiwan was up 0.24 percent and the Kospi advanced 0.58 percent.
• The 10-year Treasury bond yield closed at 3.77 percent, down 14 basis points for the week.

Domestic Equity Market Diary (4/18/2010)

The figure above shows the performance of each sector in the S&P 500 index for the week. The best-performing sector was technology, up 1.4 percent. Other better-performing sectors included industrials and consumer discretion. Underperforming sectors included materials, telecom services and healthcare.

Within the technology sector the best-performing stock was Teradyne Inc., up 8.8 percent. Other top technology stocks were Linear Technology Corp., Applied Materials Inc., Texas Instruments Inc. and National Semiconductor Corp.

Strengths

• The tires and rubber group was the best-performing group for the week, up 11 percent, led by its single member Goodyear Tire & Rubber Co. At the firm’s annual shareholder meeting this week, the CEO said he is confident in Goodyear’s ability to grow as global economies recover.
• The construction materials group and the building products group both outperformed, rising 9 percent and 5 percent respectively. March housing starts increased to an annual rate of 626,000, up 1.6 percent from February, which beat the consensus estimate. Building permits climbed to the highest level since October 2008.
• The semiconductors group outperformed, gaining 5 percent. Two members of the group (Intel Corp. & Linear Technology Corp.) reported quarterly earnings in excess of the analyst consensus estimate.

Weaknesses

• The investment bank and brokerage group was the worst performer, falling 8 percent, led by its largest member, Goldman Sachs Group Inc. The SEC charged Goldman with fraud over the marketing of a debt product tied to subprime mortgages that had allegedly been designed to fail.
• The fertilizer & agricultural chemicals group underperformed, declining 6 percent, led by its largest member, Monsanto Co. The company missed earnings expectations last week, and it was downgraded by a brokerage firm this week.
• The managed-care group declined 4 percent. There may be some concern that other states could follow Massachusetts in rejecting proposed rate increases on healthcare plans.

Opportunities

• There may be an opportunity for gain in 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.