U.S. Equity Market Radar (May 7, 2012)
The S&P 500 Index declined 2.44 percent this week. Telecommunication services and utilities outperformed as investors sought higher dividend yields in the wake of higher market volatility. The S&P 500 suffered its worst weekly decline since December as the market digested a slew of economic releases, which on average came in slightly below expectations.
Strengths
- AT&T and Verizon led the telecommunication service sector for a second week, as investors sought the relative safety of market leading dividend yields.
- Utilities also performed well during this “risk off’ week, particularly as the 10-year U.S. Treasury yield sank to just 1.88 percent.
- The defensive consumer staples sector outperformed the broader market with relatively small decline of 0.52 percent. Whole Foods Market and Archer-Daniels gained 7.8 percent and 3.8 percent, respectively, during a challenging trading week.
Weaknesses
- Notably, information technology trailed the S&P 500 Index this week by 131 basis points, and was the worst-performing sector within the broad market. Accordingly, Apple declined by 6.3 percent over the last five days.
- Energy and Materials lagged the market as the price of crude oil dropped below $100 a barrel and the Thompson Reuters/Jefferies Commodity Index fell by 2.7 percent this week on soft employment data and economic growth concerns. Diamond Offshore Drilling fell 4.6 percent during the week.
Opportunity
- Despite downside volatility during the week, the homebuilding subsector continues to perform well, hitting a new 52-week high, and finishing the week relatively flat in a down market.
Threat
- The U.S. remains a bright spot in the global economy and external shocks from Europe or Asia can’t be ruled out.
