U.S. Equity Market Radar (December 17, 2012)
The S&P 500 Index fell modestly this week after stringing together gains for three weeks in a row. The materials sector was the standout performer this week, while the consumer discretionary sector lagged.
Strengths
- Materials rallied this week as iron ore and steel names rallied on improving sentiment toward a Chinese recovery as HSBC’s Flash Purchasing Managers’ Index (PMI) for December indicated accelerating activity. Cliffs Natural Resources, U.S. Steel, and Allegheny Technologies were the leaders. Chemical names were also strong on lower natural gas prices and improving prospects for a global pick-up in activity.
- The telecommunication services sector also rallied this week on mergers and acquisition activity in the space.
- J.C. Penney was the best performing stock in the S&P 500 this week, up 15.47 percent. The stock has been volatile in recent months as the company’s turnaround strategy has been viewed skeptically by the investor community. The stock was up this week on a more promotional approach as opposed to the “everyday low price” strategy that has defined the turnaround.
Weaknesses
- The consumer discretionary sector was the worst performer this week, driven lower by apparel and shoe makers and related retailers.
- The utilities sector also underperformed, although the sector had performed well in recent weeks after selling off due to dividend tax fears in the aftermath of the election.
- Family Dollar Stores was the worst performing stock in the S&P 500 this week, falling 7.24 percent. The company gave cautious guidance for the fourth quarter, citing cautious consumers and tough competition.
Opportunity
- The market has been resilient even as the fiscal cliff remains uncertain, giving hope the market can continue its historical, seasonal strength into year end.
Threat
- There has been a lot of economic data noise due to Superstorm Sandy that will likely depress reported economic results for November.
