U.S. Equity Market Cheat Sheet (June 27, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. Four sectors gained and six declined. The best-performing sector for the week was materials which increased 2.35 percent. Other top-three sectors were consumer discretionary and technology. Consumer staples was the worst performer, down 1.74 percent. Other bottom-three performers were energy and financials.
Within the materials sector the best-performing stock was International Paper, which rose 8.32 percent. Other top-five performers were Cliffs Natural Resources, FMC, Titanium Metals, and DuPont.
Strengths
- The home furnishings retail group was the best performer for the week, up 9 percent, led by Bed Bath & Beyond. The retailer reported fiscal first quarter earnings and revenue above the consensus estimates.
- The paper products group outperformed, gaining 7 percent on the strength of its largest member, International Paper. Earlier this month the firm made a hostile bid for Temple-Inland, which rejected the bid.
- The electronic manufacturing services group outperformed, rising 4 percent on the strength of its member, Jabil Circuits. Jabil shares gained after the electronics manufacturer posted fiscal third quarter adjusted earnings that were better than expectations, and it also announced a $200 million stock repurchase plan over the next 12 months.
Weaknesses
- The healthcare facilities group was the worst performer, down 7 percent, led by Tenet Healthcare.
- The drug retail group underperformed, losing 5 percent, led down by member Walgreens. The retail drug chain announced that it plans to stop filling prescriptions for customers covered by drug benefits manager Express Scripts, beginning January 1, 2012.
- The tobacco group lost 3 percent. By October 2012, cigarette packages and cigarette ads must display graphic warning labels showing diseased lungs and other unpleasant images.
Opportunities
- There may be an opportunity for gain in merger & acquisition transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.
Threats
- The end of quantitative easing, currently scheduled by the Federal Reserve for the end of June might result in a weaker economy.
- The nuclear disaster in Japan creates uncertainty, which is not good for stock prices.
