U.S. Equity Market Radar (October 1, 2012)

U.S. Equity Market Radar (October 1, 2012)

The S&P 500 Index declined 1.33 percent this week, as the market’s euphoria over the Federal Reserve’s decision to conduct open-ended quantitative easing via purchases of mortgage-backed securities and keep interest rates exceptionally low through mid-2015 to boost employment faded. The market continues to struggle with the uncertainty in Europe. Speculation about the Spanish bank stress test continued for much of the week until the results were released on Friday.

Strengths

• The utility sector rose 0.93 percent and was the only positive sector this week. The utility sector has been the worst performer over the past month and quarter and is a classic defensive, “risk off” group. Risk off was in vogue this week and the sector benefitted from that.
• The health care sector registered the second best performance this week, but did decline 0.25 percent. Cerner Corp was the best performer within health care and rose nearly 4 percent on Friday as a competitor Allscripts Healthcare Solutions Inc. said it is exploring a sale or leveraged buyout. Amgen, Dentsply International and DaVita were also strong performers this week.
• Accenture Plc. was the best performing stock in the S&P 500 this week as the company rose by more than 7 percent.  The company reported earnings and raised guidance after the close on Thursday, citing very strong outsourcing trends.

Weaknesses

• After a strong run, cyclical sectors have underperformed for the last two weeks as technology, materials and financials were the worst performers this week.
• The technology sector experienced broad-based weakness as market leader Apple fell by more than 2 percent. Netapp, Advanced Micro Devices and Micron Technology were among the week’s worst performers in technology.

• Jabil Circuit was the worst performer this week in the S&P 500, falling by more than 13 percent as the company reported a mixed earnings report, and guidance for the upcoming quarter and 2013 disappointed, a weak global economy was the primary culprit.

Opportunity

• While debasing the value of their paper currencies in the long term, renewed money printing in the developed world may have the ability to send asset prices higher in the near term.

Threat

• The market will now shift to earnings preannouncements and the upcoming elections, which could cause some volatility.