U.S. Equity Market Cheat Sheet (February 28, 2011)
The figure shows the performance of each sector in the S&P 500 Index for the week. One sector increased while nine decreased. The lone sector with positive performance was energy, up 1.07 percent. Sectors with the lightest declines were utilities and consumer staples. The industrials sector was the worst performer, down 3.31 percent. Other bottom-three performers were financials and materials.
Within the energy sector, the best-performing stock was Chesapeake Energy, which rose 16.23 percent. Other top-five performers were Range Resources, Cabot Oil & Gas, Consol Energy and Rowan Companies.
Strengths
- The specialty consumer services (H&R Block) was the best-performing group for the week, up 4 percent. The tax preparer said it expects ānear break-evenā results for its fiscal quarter-ended January 31, 2010.
- Five of the top-ten best-performing groups were energy-related (oil & gas exploration & production, oil & gas drilling, coal & consumable fuel, oil & gas storage & transportation, and integrated oil & gas). These groups rose between 0.8 percent and 4 percent as the price of crude oil rose during the week.
- The packaged foods group outperformed, gaining 2 percent. The CEO for H.J. Heinz Co. said at an investor conference that the company expects third-quarter profit around 84 cents, beating expectations. Heinz also increased its full-year profit outlook.
Weaknesses
- The gold group (Newmont Mining) was the worst-performing group, down 7 percent.
- The homebuilding group underperformed, losing 7 percent. The Commerce Department reported that January new home sales declined 12.6 percent from December to 284,000 units. This was below the 305,000 unit consensus estimate.
- The airlines group (Southwest Airlines) was down 6 percent. The price of jet fuel is rising due to rising crude oil prices and is threatening airline profits.
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 investorsā 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.
