- The major market indices were mixed this week. The Dow Jones Industrial Index fell 0.56 percent. The S&P 500 Stock Index gained 0.16 percent, while the Nasdaq Composite finished 1.26 percent higher.
- Barra Growth outperformed Barra Value as Barra Value finished 0.07 percent higher while Barra Growth rose 0.25 percent. The Russell 2000 closed the week with a gain of 1.90 percent.
- The Hang Seng Composite finished higher by 2.56 percent, Taiwan was up 0.80 percent and the Kospi gained 1.41 percent.
- The 10-year Treasury bond yield closed at 3.29 percent, up 5 basis points for the week.
U.S. Equity Market Diary (5/31/2010)
The figure above shows the performance of each sector in the S&P 500 index for the week. The best-performing sector was consumer discretion, up 1.9 percent. Other better-performing sectors included materials and technology. The three worst-performing sectors were consumer staples, financials, and telecom services.
Within the consumer discretion sector the best-performing stock was Time Warner Cable Inc, up 8 percent. Other top-five performers in the sector were Interpublic Group of Companies Inc, GameStop Corp, Coach Inc, and Wynn Resorts Ltd.
Strengths
- The wireless telecom services group was the best-performing group for the week, up 8 percent, led up by Sprint Nextel Corp. One major brokerage firm upgraded the stock to a “Buy” and another one reiterated its “Buy” recommendation. Both firms cited their belief that Sprint is doing a better job reducing “churn” (the percentage of contractual customers who cancel service).
- The independent power producers & energy traders group outperformed, rising 7 percent. All three stocks in the group (AES Corp, Constellation Energy Group Inc, and NRG Energy Inc) rebounded this week after selling off in the prior week.
- The computer storage & peripherals group also outperformed, gaining 6 percent, led by NetApp Inc. The provider of integrated network storage and data management hardware rose after reporting earnings above the consensus estimate and issuing a stronger than expected forecast, citing that demand for its storage gear is rising as companies modernize aging data centers.
Weaknesses
- The fertilizer & agricultural chemicals group was the worst-performing group, down 6 percent, led by it largest member, Monsanto Co. The firm cut its earnings forecast this week for the second time in seven weeks as it lowered prices of its Roundup herbicide to near the levels of generic versions coming into the U.S. from China.
- The oil & gas equipment & services group underperformed, losing 6 percent. These stocks were weak after President Barack Obama on Thursday announced a moratorium on new offshore drilling for six months.
- The education services group underperformed, declining by 5 percent. The for-profit education stocks continue to suffer from investor concern over uncertainty about the effect of proposed rules to be issued by the Department of Education.
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 timeframe, 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.
