U.S. Equity Market Cheat Sheet (April 4, 2011)
The figure 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 telecom services which rose 4.15 percent. Other top-three sectors were industrials and materials. Technology was the worst performer, down 0.09 percent. Other bottom-three performers were financials and consumer discretionary.
Within the telecom services sector the best-performing stock was AT&T, which rose 6.14 percent. Other top-three performers were Metropcs Communications and American Tower Corp.
Strengths
- The paper products group was the best-performing group for the week, up 8 percent. The group was led by International Paper, which increased its quarterly dividend by 40 percent from $0.75 per year to $1.05 per year. The company also announced that it is buying up to 75 percent of Andhra Pradesh Paper Mills, thereby taking its first position in India’s paper market.
- The health care facilities group (Tenet Healthcare) outperformed, rising 6 percent. Investors appeared to be more optimistic about the potential for an uptick in hospital utilization given a more stable economic environment. Most publicly-held hospital company stocks rose this week.
- The Internet retail group rose 5 percent, led by Amazon.com and Priceline.com. Amazon launched a cloud-based music service which allows users to store music on the cloud and access it on multiple devices. Also, a major brokerage firm raised its target price on the stock, citing their belief that the market is underestimating the positive share shift from specialty retailers to Amazon. On Thursday of the prior week a major brokerage firm increased its 2012 earnings estimate and its price target on Priceline.
Weaknesses
- The homebuilding group underperformed, losing 4 percent. The S&P/Case Shiller Home Price Index 20 City Composite was 3.1 percent lower in January compared to a year ago. Homebuilder Lennar Corp. reported a 12 percent year-over-year drop in new home orders for the three-month period ending February 28.
- The electronic component group lost 4 percent, led down by Amphenol Corp. A major brokerage firm lowered its 2011 revenue, earnings estimates and price target on the stock based on a slowdown in defense-related orders during the month of March.
- The electronic manufacturing services group fell 3 percent after being the best-performing group last week on a strong earnings report from Jabil Circuit. Jabil sold off this week, perhaps on investor concern about supply chain disruptions from the disaster in Japan.
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 time frame, it could be a threat to stock prices.
- Quantitative easing currently being implemented by the Federal Reserve might result in unintended consequences.
- The nuclear disaster in Japan creates uncertainly, which is not good for stock prices.
