U.S. Equity Market Radar (May 21, 2012)
The S&P 500 Index declined 4.30 percent this week. Telecom services, consumer staples and utilities outperformed as investors sought safety in the economically defensive sectors. Classic cyclical sectors such as materials and technology, along with financials, underperformed.
Strengths
- AT&T and Verizon paced the telecom service sector for the fourth week in a row as investors sought the relative safety of market leading dividend yields.
- The best individual stock performers this week were Salesforce.com, which rose by 5.7 percent, and Wal-Mart, which rose by 5.1 percent, as both companies beat earnings expectations.
Weaknesses
- The financial sector was hit particularly hard this week with the entire sector falling by more than 7 percent. Insurance companies led on the downside with Hartford Financial, MetLife and Lincoln National all falling by more than 12 percent.
- The materials sector was down more than 6.5 percent as steel-related names fell sharply. U.S. Steel and Allegheny Technologies were both down more than 16 percent this week.
- It was a very rough week for J.C. Penney which is in the middle of a new strategy with a new CEO. The company had a significant loss in the quarter as sales fell 20 percent.
Opportunity
- There were very few positive industry groups this week but gold stocks bounced on European concerns, while airline stocks were up due to lower oil prices. One week does not make a trend, but these groups are definitely worth watching.
Threat
- The U.S. remains a bright spot in the global economy but external shocks from Europe or Asia can’t be ruled out.
