U.S. Equity Market Cheat Sheet (January 3, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. Five sectors increased and five decreased. The best-performing sector for the week was energy which rose 0.95 percent. Other outperforming sectors included telecom services and materials. Consumer discretion was the worst performer, followed by healthcare and consumer staples.
Within the energy sector the best-performing stock was Anadarko Petroleum Corp., up 11 percent. Other top-five performers were CONSOL Energy Inc., Southwestern Energy Co., Nabors Industries Inc., and FMC Technologies Inc.
Strengths
- The fertilizer & agricultural chemicals group was the best-performing group for the week, up 4 percent. The stocks of agricultural-related companies rose this week amid speculation that corn and soybean prices will continue price gains into next year. The CEO of an agricultural company predicted that world supplies of grain are likely to be tight until well into 2011.
- The oil & gas exploration & production group outperformed, gaining 2 percent, led by Anadarko Petroleum Corp. which rose 11 percent. A newspaper report said that BHP Billiton Ltd. may offer $90 per share for Anadarko. Spokesmen for both Anadarko and BHP declined to comment, citing company policy against addressing rumors.
- The gold group outperformed, up 2 percent, led by its single member, Newmont Mining Corp. The price of gold increased during the week.
Weaknesses
- The specialty consumer services group was the worst performer, down 6 percent on the weakness in its single member, H&R Block Inc. The tax return preparation firm lost its tax refund loan banking partner, HSBC bank. The Office of the Comptroller of the Currency ordered HSBC not to provide funding for refund anticipation loans to H&R Block.
- The photo products group underperformed, losing 5 percent, led by its single member, Eastman Kodak Co. The last laboratory with the capability to develop Kodachrome film developed its final roll on Thursday. The storied film, introduced by Kodak in 1935, has met its end.
- The internet retail group underperformed, dropping 2 percent. All three members of the group (Amazon.com Inc., Priceline.com Inc., and Expedia Inc.) declined during the week, perhaps due to year-end profit taking.
Opportunities
- There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2011. 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.
- Quantitative easing currently being implemented by the Federal Reserve might result in unintended consequences.
