U.S. Equity Market Cheat Sheet (July 11, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. Five sectors gained and five declined. The best-performing sector for the week was technology which increased 1.59 percent. Other top-three sectors were materials and energy. Telecom services was the worst performer, down 1.27 percent. Other bottom-three performers were financials and healthcare.
Within the technology sector, the best-performing stock was Western Digital, which rose 5.13 percent. Other top-five performers were Salesforce.com, Apple, Accenture, and Autodesk.
Strengths
- The casinos & gaming group was the best-performing group, gaining 6 percent. Wynn Resorts advanced after the Macau government reported that Macau casino gaming revenue for June increased 52.4 percent year-over-year.
- The general merchandise stores group outperformed, up 5 percent, driven by its largest member, Target. The retailer reported June same-store-sales increased 4.5 percent year-over-year, above the consensus estimate of 3.2 percent.
- The internet retail group gained 5 percent. Netflix increased after announcing plans to enter the markets in Latin America and the Caribbean later this year. Priceline.com and Amazon.com also contributed to the group’s gain.
Weaknesses
- The building products group was the worst performer, down 4 percent on weakness in its single member, Masco. Masco’s revenue is highly dependent on the U.S. housing industry which has been weak.
- The construction materials group lost 4 percent on weakness in its single member, Vulcan Materials. The weakness might be related to investor concern over public (federal and state) spending which accounted for approximately 55 percent of Vulcan’s end demand in 2010.
- The investment banking & brokerage group underperformed, losing 4 percent. Goldman Sachs and Morgan Stanley both sold off for the week. A brokerage firm lowered second quarter earnings estimates for both companies, and another brokerage firm lowered its second quarter earnings estimate for Goldman.
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
- The end of quantitative easing on June 30 might result in a weaker economy.
