U.S. Equity Market Cheat Sheet (April 18, 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 consumer staples which rose 2.05 percent. Other top-three sectors were healthcare and consumer discretion. Energy was the worst performer, down 3.06 percent. Other bottom-three performers were materials and financials.
Within the consumer staples sector the best-performing stock was Supervalu Inc which rose 12.74 percent. Other top-five performers were Kraft Foods Inc, ConAgra Foods Inc, Safeway Inc, and Brown-Forman Corp.
Strengths
- The apparel & accessory group was the best-performing group for the week, up 6 percent on the strength of its largest member, Coach Inc. A major brokerage firm recommended purchase of Coach in order to take advantage of the stock price weakness due to uncertainty over the events in Japan. The other two group members, Polo Ralph Lauren Corp and VF Corp, also rose.
- The real estate services group outperformed, rising 5 percent, led by its single member, CB Richard Ellis Group Inc. A major brokerage firm upgraded the stock of the commercial real estate leasing and sales firm to a “Buy”, citing January and February US commercial real estate transaction volumes which were much stronger than they expected.
- The biotechnology group outperformed, increasing 3 percent, led by Biogen Idec, Inc. The firm released data form the first Phase 3 trial for its potential oral multiple sclerosis drug, BG-12. Analyst interpreted the data as a positive for Biogen Idec.
Weaknesses
- The health care facilities group was the worst-performer for the week, down 12 percent, led by its single member, Tenet Healthcare Corp. The hospital firm sued fellow hospital firm Community Health Systems Inc, alleging that Community had overbilled the Medicare system. Both stocks sold off sharply. Community had attempted to acquire Tenet, but the offer was rejected by Tenet.
- The diversified metals & mining group underperformed, losing 10 percent on weakness in its single member, Freeport McMoRan Copper & Gold Inc. The price of copper fell during the week, and the price of gold rose.
- The aluminum group sold off 8 percent. Its single member, Alcoa Inc, reported earnings above the consensus estimate, but revenue was below the consensus. Investors reacted negatively to the report.
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.
- The nuclear disaster in Japan creates uncertainly, which is not good for stock prices.
