U.S. Equity Market Cheat Sheet (October 11, 2011)
The domestic stock market as measured by the S&P 500 Index was higher this week by 2.12 percent. The figure below shows the performance of each sector in the index for the week. Eight sectors increased and two declined. The best-performing sector for the week was materials, which increased 6.21 percent. Other top-three sectors were consumer discretion and energy. Telecom services was the worst performer, down 1.36 percent. Other bottom-three performers were utilities and financials.
Within the materials sector, the best-performing stock was Monsanto, up 18.14 percent. Other top-five performers were Freeport-McMoRan Copper & Gold, Dow Chemical, Cliffs Natural Resources, and CF Industries Holdings.
Strengths
- The fertilizers & agricultural chemicals group was the best-performing group for the week, gaining 13 percent, led by its largest member, Monsanto. The firm reported fourth quarter earnings and revenue above consensus estimates. Also, a major brokerage firm upgraded the stock from neutral to overweight.
- The oil & gas refining & marketing group outperformed, up 13 percent. All four of the group members (Valero Energy, Marathon Petroleum, Sunoco, and Tesoro) rose.
- The diversified metals & mining group rose 11 percent on strength in the group’s largest member, Freeport-McMoRan Copper & Gold. The price of copper increased for the week.
Weaknesses
- Three of the real estate investment trust (REIT) groups (diversified REITs, office REITs, and industrial REITs) were among the ten worst-performing groups, down between 3 percent and 6 percent. Investors likely were expressing concern that the recovery in commercial real estate might be imperiled by potential softness in the global economy.
- The airlines group underperformed, losing 4 percent, led by its single member, Southwest Airlines. Airlines in general sold off on Monday on rumors that American Airlines was facing a possible bankruptcy.
- The diversified support service group lost 4 percent on weakness in its largest member, Iron Mountain. One brokerage firm downgraded the stock to neutral from outperform, and another brokerage firm lowered its target price on Iron Mountain.
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
- 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.
