U.S. Equity Market Diary (July 19, 2010)
The figure below shows the performance of each sector in the S&P 500 Index for the week. Two sectors increased slightly. The best-performing sector was consumer staples, up 0.1 percent. Other better-performing sectors included technology and telecom services. The three worst-performing sectors were financials, industrials and materials.
Within the consumer staples sector the best-performing stock was Dean Foods Co, up 4 percent. Other top performers in the sector were Walgreen Co., Philip Morris International Inc., Estee Lauder Companies Inc. and Constellation Brands Inc.
Strengths
- The forest products group was the best-performing group for the week, up 13 percent, led by its single member, Weyerhaeuser Co. The company announced that the ex-dividend date for the $26.47 per share special dividend will be July 20, 2010.
- The fertilizer & agricultural chemicals group was the second-best performer, up 9 percent, led primarily by Monsanto Co., and to a lesser extent, CF Industries Holdings Inc. These moves are likely related to the recent rises in the prices of wheat and corn. It was also reported recently that Monsanto’s CEO and CFO had acquired about $3.5 million worth of company stock.
- The investment bank & brokerage group outperformed, up 4 percent. Goldman Sachs Group Inc. settled a civil fraud suit with the SEC. Charles Schwab Corp. reported second-quarter earnings above the consensus estimate, and it indicated that the second half of the year would show improvement.
Weaknesses
- The diversified metals & mining group underperformed, down 9 percent, led by its largest member, Freeport-McMoRan Copper & Gold Inc. The prices of copper and gold declined during the week.
- The building products group lost 9 percent, led by its single member, Masco Corp. Stock weakness here may be related to the continuing weakness in the housing industry.
- The regional bank group was down 7 percent. This could be related to concerns about some weaknesses in earnings reports issued this week by some of the large banks.
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.
