U.S. Equity Market Cheat Sheet (May 2, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. All ten sectors increased. The best-performing sector for the week was healthcare which rose 2.89 percent. Other top-three sectors were industrials and utilities. Materials was the worst performer, up only 1.03 percent. Other bottom-three performers were technology and consumer discretion.
Within the healthcare sector the best-performing stock was Waters which rose 7.93 percent. Other top-five performers were Cerner, Watson Pharmaceuticals, Wellpoint, and Aetna.
Strengths
- The tires & rubber group was the best performer for the week, rising 14 percent, led by its single member, Goodyear Tire & Rubber, which reported first quarter revenue and earnings substantially above the consensus estimates. The firm sold 7 percent more tires in the quarter than in the same quarter a year ago, and its per-tire revenue was up 15 percent.
- The home furnishings group was the second-best performer, up 11 percent. The group’s single member, Leggett & Platt, reported quarterly revenue and earnings which handily beat the consensus estimates, and the firm provided full-year earnings and revenue guidance above the consensus estimates.
- The healthcare technology group outperformed, gaining 7 percent on the strength of its single member, Cerner. The provider of electronic medical records technology reported earnings and revenue above the consensus estimates, and it raised its full-year earnings and revenue guidance.
Weaknesses
- The real estate services group was the worst-performing group, down 10 percent on weakness in its single member, CB Richard Ellis Group. The commercial real estate sales and leasing firm reported quarterly earnings slightly above the consensus, but revenue was below the consensus, and its reiterated full-year earnings guidance was also below consensus.
- The household appliances group underperformed, losing 4 percent. Group member Stanley Black & Decker reported quarterly earnings and guidance which appeared to disappoint some investors.
- The paper packaging group underperformed, declining 2 percent. Both group members (Bemis Company and Sealed Air) reported quarterly earnings below the consensus estimates.
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.
- The nuclear disaster in Japan creates uncertainly, which is not good for stock prices.
