U.S. Equity Market Radar (October 29, 2012)

U.S. Equity Market Radar (October 29, 2012)

The S&P 500 Index fell 1.48 percent this week as most of the decline came on Tuesday on apparent disappointment in Apple’s release of the iPad mini and other product refreshes. Earnings season is in full swing and many have disappointed again this week.

Strengths

• The health care sector was the best performer this week but still fell 0.84 percent. The sector tends to be defensive in nature, and this week was no exception. The best performers were from a variety of industry groups but the medical instrument and equipment group experienced broad-based strength.
• The technology sector also outperformed, even as bellwether names such as Apple and Amazon reported disappointing earnings results. The technology sector was the worst performer last week and much of the bad news already appears to be priced in.
• Varian Medical Systems was the best performing stock in the S&P 500 this week as the company rose by 14.5 percent after it reported earnings and revenue that exceeded expectations. Oncology-related sales were particularly strong and the company was able to overcome the macro headwinds that have bedeviled many this earnings season.

Weaknesses

• The materials sector was the worst performer, falling 2.8 percent. The sell-off was broad-based and encompassed most areas of the sector from steel to chemicals to mining.
• The energy sector also underperformed as oil prices (WTI) fell 4.25 percent this week and then combined with a handful of earnings disappointments.
• Newfield Exploration dropped by more than 20 percent and was the worst performer this week in the S&P 500. The company announced on its earnings call that its international oil volumes could be down as much as 25 percent in 2013, much worse than analysts were expecting.

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.