U.S. Equity Market Radar (October 22, 2012)
The S&P 500 Index rose 0.32 percent this week even as the market sold off sharply on Friday. Earnings season is in full swing and technology shares have not fared well. Intel, IBM and Google all disappointed investors and built on other recent disappointments in the space.
Strengths
- The materials sector was the best performer this week, rising 2.10 percent. Steel and chemical names were particularly strong. Sentiment on cyclicals in general improved this week as investors are looking to strong growth in 2013, and steel companies are classic cyclicals. Within the chemical space, ethylene prices appear headed higher, helping margins for many chemical companies.
- The financial sector registered the second-best performance this week, rising by 1.95 percent. Citigroup rose 7 percent on earnings and on news that the CEO had been replaced. Insurance stocks also performed well as catastrophe losses have been lower than expected from a few companies that have already reported.
- Dean Foods was the best performing stock in the S&P 500 this week as the company rose by more than 22 percent after its WhiteWave Foods unit filed for an IPO.
Weaknesses
- The information technology sector was the worst performer, falling 2.42 percent. The sell-off was largely related to high profile names such as Intel, IBM and Google reporting disappointing earnings results or outlooks.
- The consumer staples sector also underperformed as several companies in the sector reported disappointing results, which often were driven by negative European sales and/or unexpected currency losses.
- Apollo Group was the worst performer this week in the S&P 500, falling by more than 28 percent as the company reduced its 2013 revenue forecast and announced it would close campuses and implement layoffs.
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 is clearly focused on earnings announcements and the upcoming elections, which could cause some volatility.
