U.S. Equity Market Cheat Sheet (August 29, 2011)
The domestic stock market was higher this week with the S&P 500 Index gaining 4.74 percent. The figure below shows the performance of each sector in the index for the week. All ten sectors increased. The best-performing sector for the week was technology which increased 6.19 percent. Other top-three sectors were consumer discretionary and industrials. Utilities was the worst performer, up 2.05 percent. Other bottom-three performers were consumer staples and telecom services.
Within the technology sector the best-performing stock was JDS Uniphase, which rose 13.26 percent. Other top-five performers were Flir Systems, F5 Networks, Jabil Circuit and Harris Corp.
Strengths
- The construction materials group was the best-performing group for the week, up 17 percent, led by its single member, Vulcan Materials. Short interest in the stock as a percent of the float at August 15 was 19.7 percent, so perhaps short-covering may have played a part in the strength.
- The healthcare technology group outperformed, rising 16 percent on the strength of its single member, Cerner Corp. A brokerage firm upgraded the stock on August 19 to âOutperformâ from âNeutral.â
- The specialty stores group rose 13 percent. Group member Tiffany & Co. reported second quarter earnings and revenue which handily beat the consensus estimates, and it raised its full-year earnings outlook.
Weaknesses
- The industrial real estate investment trust (REIT) group was the worst-performing group, down 6 percent, led by its single member, ProLogis. The weakness might be related to investor concern that a soft patch in the economy could impact real estate values.
- The brewers group also underperformed, losing 0.47 percent, led by its single member Molson Coors Brewing. The company this week announced three new executive appointments to its international beer business. The company said it is committed to accelerating its expansion into new markets. Beer demand in North America and the U.K. has been sluggish.
- The paper packaging group underperformed, gaining 0.87 percent. Group member Sealed Air Corp. was down 2 percent for the week. A major brokerage firm noted that third quarter protective packaging demand could be sluggish (down 1 to 2 percent), and that year-to-date flexible packaging volumes are down low single digits.
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
- A mid-cycle slowdown in the domestic economy would be negative for stocks.
- An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.
