U.S. Equity Market Diary (November 22, 2010)
The figure below shows the performance of each sector in the S&P 500 index for the week. Five sectors increased and five sectors decreased. The best-performing sector for the week was industrials which rose 0.82 percent. Other outperforming sectors were energy and consumer discretion. Financials were the worst performer, followed by utilities and materials.
Within the industrials sector, the best-performing stock was Fluor Corp., up 5 percent. Other top performers were Honeywell International Inc., Caterpillar Inc., Avery Dennison Corp. and Pall Corp.
Strengths
- The specialty stores group gained 5 percent, led by its largest member, Staples Inc., which reported third quarter results that appeared to be favorably received by analysts and investors.
- The apparel and accessory group outperformed, rising 5 percent. The stocks of all three members of the index (Coach Inc., Polo Ralph Lauren Corp., V.F. Corp) rose for the week.
- The leisure products group outperformed, up 4 percent, led by Mattel Inc. The toy maker increased its dividend by 10.7 percent and increased its stock repurchase program by $500 million. In addition, an SEC filing showed that Icahn Capital LP bought 2.4 million shares of Mattel in the third quarter.
Weaknesses
- The homebuilding group was the worst performer in the S&P 500 this week falling by 8 percent. October housing starts fell to 519,000 from a revised 588,000 in September, below the 598,000 expected by economists. Also, building permits, a sign of future activity, rose by 0.5 percent to 550,000, but were less than the 568,000 forecast.
- The healthcare facilities group underperformed, losing 6 percent, led down by its single member, Tenet Healthcare Corp.
- The real estate services group lost 6 percent on the weakness of its single member, CB Richard Ellis Group Inc. The company held its annual business review day for analysts and investors this week.
Opportunities
- There may still be opportunity for gains in merger and aquistion (M&A) transactions in 2010. Corporate liquidity remains high, thereby providing the means to pursue acquisitions.
Threats
- As investors’ expectations for an improving economy not materialize on a reasonable time frame, stock prices could be threatened.
- 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.
