U.S. Equity Market Radar (July 9, 2012)
The S&P 500 Index fell 0.55 percent this week, driven lower by a disappointing employment report on Friday. Defensive areas tended to outperform such as consumer staples and telecommunications services, along with select retail names in the consumer discretionary sector.
Strengths
- The consumer staples sector rose 0.54 percent this week as defensive tobacco stocks rose along with names such as Wal-Mart, Constellation Brands and Monster Beverage.
- The consumer discretionary sector was also able to eke out a small gain this week as discount stores such as Ross Stores and Family Dollar tended to do well. Homebuilders were also among the best performers for the week continuing a recent trend.
- The best individual stock performer this week was Netflix which rose 19.6 percent as the company announced that subscribers streamed more than 1 billion hours of video in June.
Weaknesses
- The industrials sector lagged as heavyweights such as General Electric, Emerson Electric and Joy Global all fell by more than 2.5 percent this week.
- The financial sector also lagged with Bank of America and JP Morgan both falling by more than 5 percent.
- Fossil, Inc. was the worst performer this week, falling by more than 10 percent on fears that excessive discounting and promotions at the company’s retail stores indicate soft demand.
Opportunity
- A barrage of government policy actions out this week with rate cuts from the European Central Bank (ECB) and Bank of China, along with more quantitative easing from the Bank of England, appears likely to propel the recent rally in risky assets even further.
Threat
- While policymakers in Europe have made strides to stabilize the situation, many risks remain and the situation remains very fluid.
- China has now cut interest rates for the second time in a month, which likely indicates the conditions on the ground remain challenging.
