U.S. Equity Market Cheat Sheet (November 7, 2011)

U.S. Equity Market Cheat Sheet (November 7, 2011)

The domestic stock market as measured by the S&P 500 Index was lower this week by 2.48 percent. All ten sectors of the S&P 500 decreased. The best-performing sector for the week was utilities which declined 0.39 percent. Other top-three sectors were telecom services and consumer staples. Financials was the worst-performer, down 5.41 percent. Other bottom-three performers were health care and materials.

Within the utilities sector the best-performing stock was AES Corp., up 2.23 percent. Other top-five performers were ONEOK, Inc., TECO Energy, Consolidated Edison and Duke Energy.

Strengths

• The personal products group was the best-performing group for the week, up 9 percent on strength in its largest member, Estee Lauder. The cosmetics firm reported quarterly earnings and revenue above the consensus estimates.

• The home entertainment software group outperformed rising 5 percent on strength in its single member Electronic Arts. The firm reported earning and revenue the prior week which beat the consensus estimate. The firm’s recently released title “Battlefield 3” is reported to be seeing strong demand.
• The trading companies & distributors group gained 3 percent.  Group member Fastenal reported that sales for the month of October were up 21.4 percent year-over-year.

Weaknesses

• The real estate services group was the worst-performing group, declining 12 percent. The group’s single member, CBRE Group, rose in the prior week following its earning report, but gave the gain back this week.

• The multiple-sector holdings group was down 11 percent on weakness in its single member, Leucadia National. A regulatory filing shows that Leucadia recently purchased an additional one million shares of Jefferies Group, Inc., bringing its total holdings to approximately 28 percent of broker Jefferies whose stock has been declining recently.

• The other diversified financial services group lost 10 percent, with all three members of the group (Citigroup, JPMorgan Chase, and Bank of America) declining.

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