U.S. Equity Market Radar (May 14, 2012)
The S&P 500 Index declined 1.15 percent this week. Telecommunication services and utilities outperformed as investors sought safety in the economically defensive sectors. Economically sensitive sectors such as materials and industrials underperformed.
Strengths
- AT&T and Verizon paced the telecommunication service sector for the third week in a row as investors sought the relative safety of market leading dividend yields.
- In a replay from last week, utilities also performed well as treasury yields continue to grind lower.
- The best individual stock performers this week were two food-related names, as Dean Foods rose by more than 17 percent and Tyson Foods rose by 8.5 percent, as both companies beat earnings expectations.
Weaknesses
- The materials and industrial sectors remain weak as global growth concerns weighed on these sectors.
- High profile index constituents that performed poorly this week include Cisco Systems, which fell by more than 13 percent on poor earnings guidance. JP Morgan fell by 11.5 percent on news that the company had an internal trading loss of $2 billion.
- It was a very rough week for Fossil, Inc., which fell by more than 39 percent as revenues fell short of guidance and cautious forward-looking comments caused the extreme volatility.
Opportunity
- For a second week in a row the homebuilders finished higher in a weak market, while other housing-related industry groups also performed well, including household appliances and home furnishings.
Threat
- The U.S. remains a bright spot in the global economy and external shocks from Europe or Asia can’t be ruled out.
