U.S. Equity Market Radar (April 22, 2013)
The S&P 500 suffered its worst losses of the year, falling by more than 2 percent this week. A combination of factors was the likely culprit. Chinese GDP growth disappointed in the first quarter, with investors remaining skeptical that China will be able to grow as fast as expected for 2013 with a relatively slow start to the year. Gold sold off sharply on Monday after a big drop on Friday in what appeared to be a market dislocation that was difficult for even seasoned investors in the space to explain. This sharp selloff in gold spilled over to other markets as investors feared it was a precursor to financial market volatility to come. Defensive groups outperformed, while more cyclical areas were hit the hardest.
Strengths
- The telecommunication services sector was the leader this week as Sprint Nextel rose by more than 15 percent on a takeout offer from Dish Network.
- The utility sector also outperformed as investors appreciated the stability and dividends that utilities offer.
- Sprint Nextel was the best performer this week as discussed above but Life Technologies rose by more than 8 percent on a takeout offer from Thermo Fisher Scientific.
Weaknesses
- The technology sector was the worst performer this week as bellwether technology names such as IBM, eBay and Apple were all down at least 8 percent. IBM and eBay were hit by disappointing earnings reports, while Apple was down on uncertainty over the timing of new product launches and fears of delays.
- The energy sector fell by more than 4 percent as oil was down by nearly as much. The sector was lower on macroeconomic growth fears. Bellwether energy names such as Halliburton, EOG Resources and Apache were all down more than 8 percent.
- Textron was the worst performer in the S&P 500 this week, declining 11.6 percent as the company missed first quarter earnings expectations and lowered its full year earnings forecast on weaker-than-expected business jet demand.
Opportunity
- The market is climbing that proverbial wall of worry and just shakes off any bad news.
- Global central banks are literally pulling out all the stops in an attempt to ignite economic growth.
Threat
- A market consolidation wouldnât be a surprise after a strong start to the year.
- We are in the middle of earnings reporting season and the initial reaction hasnât been good. Key names to watch next week are Caterpillar and 3M which should provide good color on global economic activity, while Apple, Starbucks and Amazon will give insights into recent consumer behavior.
