- The major market indices were higher this week. The Dow Jones Industrial Index rose 2.81 percent. The S&P 500 Stock Index gained 2.51 percent, while the Nasdaq Composite finished 1.10 percent higher.
- Barra Growth outperformed Barra Value as Barra Value finished 2.46 percent higher while Barra Growth rose 2.56 percent. The Russell 2000 closed the week with a gain of 2.37 percent.
- The Hang Seng Composite finished higher by 0.07 percent; Taiwan was down 0.61 percent and the Kospi gained 0.67 percent.
- The 10-year Treasury bond yield closed at 3.23 percent, up three basis points for the week.
U.S. Equity Market Diary (June 14, 2010)
The figure shows the performance of each sector in the S&P 500 Index for the week. All ten sectors gained. The best-performing sector was materials, up 5.3 percent. Other better-performing sectors included energy and telecom services. The three worst-performing sectors were technology, consumer staples and industrials.
Within the materials sector the best-performing stock was Titanium Metals Corp, up 15 percent. Other top-performers in the sector were Cliffs Natural Resources Inc, International Paper Co, EI Du Pont & Co and Allegheny Technologies Inc.
Strengths
- Four of the ten best-performing groups were real estate investment trusts (REITS) groups. The National Association of Real Estate Investment Trusts held its 2010 investorsā forum this week. The office REITS group (Boston Properties Inc.) was the best-performing group, up 10 percent. The residential REITS group gained 9.8 percent, led by AvalonBay Communities Inc, which raised its earnings outlook for the second quarter and the 2010 year. The other two in the top-ten were industrial REITS and retail REITS.
- The electronic component group outperformed, rising 9 percent. The group was led by Corning Inc, which had sold off for the past six weeks. This week two major brokerage firms reiterated their ābuyā recommendation on it, saying that investor concerns had been overdone.
- The paper products group outperformed, gaining 9 percent. A major brokerage firm issued a positive report on the industry, saying that the containerboard market is very tight. The report cited International Paper Co as a favorite because of the firmās very strong free cash flow and leverage to improved volumes.
Weaknesses
- A brewing battle between CVS Caremark and Walgreens made the retail drug group was the worst-performing group for the week, losing 5 percent. On Monday, Walgreens said that it would not fill prescriptions for patients newly covered under pharmacy benefit plans administered by CVSās Caremark unit starting next year. CVS countered, saying it will block as many as 53 million of its patients from filling prescriptions at Walgreens drugstores as early as next month.
- The investment bank & brokerage group underperformed, losing 3 percent, led down by it largest member, Goldman Sachs Group Inc. The firm is experiencing mounting legal and regulatory woes stemming from the firm's sale of subprime mortgage-linked securities
- The healthcare technology group declined 2 percent.
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 investorsā 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.
