U.S. Equity Market Diary (June 21, 2010)
The figure below shows the performance of each sector in the S&P 500 Index for the week. All 10 sectors gained. The best-performing sector was utilities, up 3.9 percent. Other better-performing sectors included information technology and industrials. The three worst-performing sectors were telecom, consumer discretion and materials.
Within the materials sector the best-performing stock was Pepco Holdings, up 6 percent. Other top-five performers in the sector were Ameren Corp., Centerpoint Energy, Pinnacle West and Nextera Energy.
Strengths
- The top-performing group was gold. This is a single-stock index composed of Newmont Mining. The advance in the stock was due to new levels reached in the price of gold bullion.
- The oil & gas refiners group outperformed, rising 7 percent, led by Sunoco Inc. The company plans to separate its coke-manufacturing operation to concentrate on its fuels business. It also expects its refining segment to be profitable.
- The computer hardware group outperformed, gaining 6 percent. Apple Inc. was the biggest mover as it announced that it sold over 600,000 iPhones on the first day of taking pre-orders.
Weaknesses
- The computer & electronics retail group was the worst-performing group, losing close to 8 percent, with Best Buy Co. and GameStop Corp. both falling. Best Buy announced that it was getting into the used videogame business, in which GameStop is the dominant player.
- The forest products group underperformed, losing 4 percent. This is another single stock index composed of Weyerhaeuser Co. Credit Suisse lowered estimates on the stock due to the sharp decline in prices over the last month of U.S. lumber and structural panels.
- The home improvement retail group declined close to 2 percent. A small brokerage firm lowered its price target on Lowe’s Cos. to $27 from $30.
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.
