U.S. Equity Market Diary (September 20, 2010)
The figure below shows the performance of each sector in the S&P 500 index for the week. Eight sectors gained and two declined. The best-performing sector was technology, up 4 percent. Other better-performing sectors included materials and telecom services. The three worst-performing sectors were utilities, energy and consumer staples.
Within the technology sector, the best-performing stock was Xerox Corp., up 11 percent. Other top-five performers in the sector were Lexmark International Inc., Cisco Systems Inc., Juniper Networks Inc. and Motorola Inc.
Strengths
- The office electronics group was the best-performing group for the week, up 11 percent, led by its single member Xerox Corp. The stock was up following a positive article in Barron’s.
- The retail computer & electronics group was the second-best performer, gaining 8 percent on the strength of gains in Best Buy Co. Inc. The firm reported second fiscal quarter earnings greater than the consensus, and it raised its profit forecast for the full year.
- The systems software group outperformed, rising 6 percent, led by Oracle Corp. and Microsoft Corp. Oracle reported quarterly earnings and revenue greater than the consensus estimate. Microsoft jumped on a press report that it is planning to sell debt to pay for dividends and stock repurchases.
Weaknesses
- The healthcare facilities group was the worst-performing group, down 5 percent, led by its single member, Tenet Healthcare Corp. A major brokerage firm lowered its price target on the hospital firm’s stock, citing lower utilization rates in hospitals.
- The construction materials group was the second-worst performer, down 5 percent, led by its single member, Vulcan Materials Co. A brokerage firm downgraded its rating on the stock to “neutral” from “ buy”
- The homebuilding group underperformed, losing 5 percent. Beazer Homes USA Inc. reduced its full-year outlook for new home orders, saying potential buyers remain cautious amid high unemployment and continued foreclosures.
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 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.
