U.S. Equity Market Radar (November 5, 2012)
The S&P 500 Index was little changed this week, rising 0.16 percent. The equity markets were closed Monday and Tuesday due to Hurricane Sandy and seemed to affect sentiment all week. Earnings reports were heavy again this week and were a driver of volatility that was masked by the seemingly small week-over-week change.
Strengths
- The industrial sector rose 1.40 percent this week. The sector benefitted from positive economic news from China, which finally appears to be turning the corner.
- The consumer discretion sector also rose 1.40 percent. Leaders in the sector this week were Netflix, Priceline and Starbucks which all reported earnings this week that were well received by the market.
- TripAdvisor Inc. was the best performing stock in the S&P 500 this week rising 15.89 percent as the company reported earnings that exceeded expectations. Priceline also reported earnings on Thursday and were well received, which likely reinforced the positive reaction.
Weaknesses
- The energy sector also underperformed as oil prices (West Texas Intermediate) fell 1.70 percent this week. Energy has underperformed for the past two weeks with particular weakness on Friday as the stronger jobs report diminished the need for additional Fed easing.
- The utility sector also underperformed as Hurricane Sandy inflicted damage or liabilities to numerous utilities.
- Western Union dropped by more than 33 percent and was the worst performer this week in the S&P 500. The company announced disappointing earnings and forward looking guidance. Weakening fundamentals and the threat of cutting prices weighed on the stock.
Opportunity
- Earnings season is winding down and with the presidential election next week the market can remove one uncertainty and begin looking into next year.
Threat
- Post election, the markets will likely shift their focus to the possible upcoming fiscal cliff and potential resolutions to the budget problems.
