Index Summary Diary (4/24/2010)
- The major market indices were mixed this week. The Dow Jones Industrial Index rose 1.68 percent. The S&P 500 Stock Index advanced 2.11 percent, while the Nasdaq Composite finished 1.97 percent higher.
- Barra Growth underperformed Barra Value as Barra Value finished 2.20 percent higher while Barra Growth rose 2.02 percent. The Russell 2000 closed the week with a gain of 3.82 percent.
- The Hang Seng Composite finished lower by 2.38 percent; Taiwan was down 1.32 percent and the Kospi advanced 0.15 percent.
- The 10-year Treasury bond yield closed at 3.82 percent, up 5 basis points for the week.
Domestic Equity Market Diary (4/24/2010)
The figure shows the performance of each sector in the S&P 500 Index for the week. Energy was the best-performing sector up 4.2 percent. Other sectors that performed well were healthcare, consumer staples and telecom services.
Nabors Industries Ltd., up 15.8 percent, was the best-performing stock within the energy sector. Other top energy stocks were Baker Hughes, El Paso Corp., BJ Services and Smith International.
Strengths
- The homebuilding group was the best-performing group for the week, rising 18 percent. March new home sales rose 26.9 percent from February to an annual pace of 410,000, besting the consensus estimate. The inventory of new homes on the market fell to a 6.7 month supply in March from an 8.6 month supply in February. D.R. Horton Inc, Lennar Corp, and Pulte Group Inc all increased sharply.
- Weyerhaeuser Co. led the forest products group to outperform, gaining 11 percent. The large timber firm moved forward last week on the company’s plan to convert into a REIT (real estate investment trust) by obtaining shareholder approval of a plan that calls for issuing shares to enable the necessary payout required for the conversion. The stock was also likely aided by the home sales data.
- Residential REITS also outperformed, rising 10 percent. Investors appear to be anticipating a decrease in the apartment vacancy rates and an increase in apartment rents as the economy improves. Apartment Investment & Management Co, AvalonBay Communities Inc and Equity Residential all increased during the week.
Weaknesses
- The thrifts & mortgage finance group was the worst-performing group, down 4 percent. Group member Hudson City Bancorp Inc reported quarterly earnings which were slightly below the consensus estimate and it reported an increase in non-performing loans.
- Gilead Sciences led the biotechnology group to underperform. The company lowered its full-year revenue forecast due to anticipated effects the new healthcare legislation.
- The healthcare equipment group underperformed, losing 3 percent. Baxter International Inc lowered its 2010 revenue forecast and earnings. The revised forecast includes expected impacts of the healthcare legislation.
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.
