U.S. Equity Market Radar (October 9, 2012)
The S&P 500 Index rose 1.41 percent this week, as the market climbed higher on better economic news and a more optimistic sentiment. Financials led the way on broadly improving sentiment due to the rebound in housing, loan growth and Fed policy. Technology lagged and was the only group to post a loss this week as negative earnings preannouncements weighed in the sector.
Strengths
- The financial sector was the best performer this week rising 3.03 percent. Financials have quietly become the best performer in the market over the past month, three months and trailing year. Hartford Financial Services Group was the best performer this week, rising by more than 9 percent as the company announced it is selling its life unit, a broker-dealer and its individual annuities distribution business. This will free up capital that will likely be returned to shareholders.
- The healthcare sector registered the second best performance this week, rising by 2.59 percent. The managed care companies were among the best performers with Humana, WellPoint and Aetna all rising by more than 5 percent. Some of these gains were attributed to Mitt Romney’s performance in the presidential debate.
- Netflix was the best performing stock in the S&P 500 this week as the company rose by more than 22 percent. An analyst reiterated his confidence in the company citing a proprietary survey showing improving satisfaction with the Netflix service.
Weaknesses
- The technology sector experienced weakness among a variety of industry groups. Hewlett-Packard, First Solar and JDS Uniphase all dropped by at least 8 percent.
- Energy also underperformed as oil dropped 2.43 percent and fell below $90. Exploration & production and oil service companies tended to be the hardest hit.
- Hewlett-Packard was the worst performer in the S&P 500 this week, falling by more than 13 percent as the company reported that the turnaround plan it began a year ago is still a work in progress and lowered 2013 profit estimates. The company hit a 10-year low this week.
Opportunity
- While debasing the value of its paper currency 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 announcements and the upcoming elections, which could cause some volatility.
