U.S. Equity Market Cheat Sheet (February 14, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. Nine sectors increased and one decreased. The best-performing sector for the week was consumer discretion which rose 3.5 percent. Other top-three sectors were financials and industrials. Energy was the worst performer, down 0.26 percent. Other bottom-three performers were healthcare and utilities.
Within the consumer discretion sector, the best-performing stock was Big Lots which rose 22.4 percent. Other top-five performers were J.C. Penney, Polo Ralph Lauren, Goodyear and AutoNation.
Strengths
- The tires & rubber group was the best-performing group for the week, up 12 percent, led by its single member, Goodyear Tire & Rubber Co. The company reported earnings and revenue above the consensus estimate. At least two brokers raised earnings estimates and price targets on the stock.
- The consumer finance group outperformed, rising 6 percent. Three members of the group (American Express, Capital One and Discover) increased after it was reported that U.S. consumer borrowing rose in December for a third-consecutive month, increasing by $6.1 billion, substantially above the $2.4 billion consensus.
- The specialized finance group outperformed, gaining 6 percent, led by NYSE Euronext, Inc., the owner of stock exchanges including the New York Stock Exchange, after it was disclosed the firm was near an agreement to be acquired by Deutsche Borse AG, owner of the German stock exchange.
Weaknesses
- The diversified metals & mining group was the worst-performing group, down 5 percent, led down by its largest member, Freeport-McMoRan Copper & Gold. The price of copper declined slightly during the week.
- The food distributor group was the second-worst performer, led down 5 percent by its single member, SYSCO. The company reported quarterly earnings below the consensus estimate as it experienced rising food costs, but did not pass the full increases along to its customers.
- The brewers group underperformed, losing 5 percent. The group’s single member, Molson Coors Brewing Co., reported earnings below the consensus estimate.
Opportunities
- There may be an opportunity for gain in merger & acquisition (M&A) 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 timeframe, it could be a threat to stock prices.
- Quantitative easing currently being implemented by the Federal Reserve might result in unintended consequences.
