U.S. Equity Market Cheat Sheet (September 19, 2011)
The domestic stock market was higher this week with the S&P 500 Index up by 5.35 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 7.05 percent. Other top-three sectors were consumer discretionary and industrials. Consumer staples was the worst performer, up 3.39 percent. Other bottom-three performers were health care and energy.
Within the technology sector the best-performing stock was Tellabs Inc, up 12.56 percent. Other top-five performers were F5 Networks, Jabil Circuit, FLIR Systems and Motorola Solutions.
Strengths
- The publishing & printing group was the best-performing group for the week, up 13 percent, led by McGraw-Hill Companies, which said it would separate into two companies with one focused on education and the other on financial ratings and data.
- The electronic equipment & instruments group outperformed, rising 12 percent, driven by its single member, FLIR Systems A brokerage firm report stated that this week a government website announced a $21 million Army award to FLIR for 48 infrared Star SAFIRE II night vision and infrared camera systems.
- The airlines group rose 11 percent, led by its single member Southwest Airlines. This week at an investor conference, airline executives provided guidance that capacity cuts already planned for the fall would continue into next year.
Weaknesses
- The health care facilities group was the worst performer, losing 5 percent on weakness in its single member, Tenet Healthcare. The company told investors that adjusted EBITDA for 2011 is expected to be toward the lower end of its previously communicated range. Tenet was impacted by an unfavorable mix shift including significant growth in Medicaid volumes (less profitable) and below average levels of Medicare acuity in July and August.
- The residential REITS (real estate investment trusts) group declined 2 percent. A brokerage firm report on apartment REITS said the multiple of price to funds from operations (FFO) is at a 34 percent premium to the REIT sector average, well above the 10 percent relative multiple premium experienced over the past 17 years.
- The oil & gas refining and marketing group underperformed, down 1 percent. The weakness in refiners is likely related to a recent decline in the still relatively high spread between the cost of crude oil and the selling price of refined product.
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.
