U.S. Equity Market Cheat Sheet (September 6, 2011)
The domestic stock market was slightly lower this week with the S&P 500 Index down 0.24 percent. The figure below shows the performance of each sector in the index for the week. Five sectors increased and five sectors decreased. The best-performing sector for the week was utilities which increased 0.86 percent. Other top-three sectors were healthcare and consumer staples. Financials was the worst performer, down 1.92 percent. Other bottom-three performers were telecom services and technology.
Within the utilities sector, the best-performing stock was NRG Energy, up 5.71 percent. Other top-five performers were Constellation Energy Group, PPL Corp., Progress Energy, and Entergy Corp.
Strengths
- The internet retail group was up 4 percent on strength in Amazon.com, Priceline.com, and Expedia, but it experienced weakness in Netflix. Starz Entertainment announced that it would not renew its contract with Netflix to provide its content when the existing contract expires on February 28, 2012. The content includes exclusive rights to first-run Sony and Disney movies for streaming on Netflix.
- The industrial real estate investment trusts (REITs) group gained 4 percent on strength in its single member, ProLogis. The stock declined sharply over the prior two weeks and partially recovered this week.
- The wireless telecom services group was up 4 percent on strength in the group’s largest member, Sprint Nextel. The wireless provider rose after the U.S. Department of Justice sued to block the AT&T merger with T-Mobile. Sprint has opposed that merger.
Weaknesses
- The construction materials group underperformed, losing 6 percent, led down by its single member, Vulcan Materials. The stock had rallied sharply the prior week.
- The retail home improvement group declined 6 percent with both The Home Depot and Lowe’s declining. A major brokerage firm’s recent report on the home improvement industry expressed concern that home mortgage purchase applications had declined 15 percent since the end of July as job and economic growth fears undermined buyer confidence.
- The fertilizer and agricultural chemicals group lost 5 percent. The group’s largest member, Monsanto, was weak on press reports that researchers at Iowa State University have identified initial western corn rootworm resistance to Monsanto’s Bt corn trait.
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.
