U.S. Equity Markets Diary (September 7, 2010)

U.S. Equity Market Diary (September 7, 2010)

The figure below shows the performance of each sector in the S&P 500 Index for the week. All ten sectors gained. The best-performing sector was financials, up 5.7 percent. Other better-performing sectors included consumer discretion and industrials. The three worst-performing sectors were utilities, telecom services and healthcare.

Within the financials sector, the best-performing stock was Hartford Financial Services Group Inc., up 10 percent. Other top-five performers in the sector were Principal Financial Group Inc., Unum Group, Apartment Investment & Management Co. and E-Trade Financial Corp.

Strengths

• The diversified metals & mining group was the best-performing group for the week, up 10 percent. The group was led by its largest member, Freeport-McMoRan Copper & Gold, as the prices of copper and gold increased during the week.
• The real estate services group outperformed, rising 9 percent on the strength of its single member, CB Richard Ellis Group. The large commercial real estate broker and leasing agent is benefiting from a rebound in commercial real estate activity.
• The Internet retail group advanced 8 percent. The group’s largest member, Priceline.com, gained 5 percent, and its second-largest member, Amazon.com, rose 10 percent.

Weaknesses

• The distiller & vintners group was the worst-performing group, down 3 percent. The group was led down by Brown-Forman Corp. which reported quarterly earnings below the consensus estimate.
• The fertilizers & agricultural chemicals group underperformed, declined 2 percent, led down by Monsanto Co. On Friday, a press report stated that the Arkansas Attorney General’s office is launching an inquiry into the marketing practices of Monsanto and its Roundup Ready 2 Yield soybean trait.
• The special consumer services group underperformed, losing 2 percent. Led down by its single member, H&R Block Inc. The company reported a loss from continuing operations in its first fiscal quarter that was slightly less than it reported for the same period last year, and slightly less than the analyst consensus loss estimate.

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 threaten stock prices.
• As governments around the world begin to wind down monetary and fiscal stimulus programs put in place during the economic crisis, it will likely present a headwind for stocks.