U.S. Equity Market Radar (May 6, 2013)

U.S. Equity Market Radar (May 6, 2013)

The S&P 500 powered ahead to new highs this week as cyclical sectors took the lead in a reversal of recent trends. Last week we highlighted that we could be at a potential inflection point in the market as the leadership of defensive areas such as telecom, staples, healthcare and utilities started to show signs of cracking last week. One week does not make a trend but it appears that the leadership baton may have been handed off.

Domestic Equity Market - U.S. Global Investors
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Strengths

  • The technology sector was the leader this week in a broad based rebound. Outperformers included Advanced Micro Devices, Seagate Technology and Apple.
  • The energy sector was the runner up this week as earnings from Pioneer Natural Resources and Ensco were well received and the coal sector rebounded with Consol Energy and Peabody Energy both rising sharply.
  • Advanced Micro Devices was the best performer this week rising by more than 36 percent. The company is the subject of takeover rumors, which has occurred in the past but the magnitude of the move adds credence to this speculation.

Weaknesses

  • The utility sector was the worst performer this week with mixed performance from constituents. A sector rotation appears to be in the works as cyclicals gain favor.
  • The telecom services sector under performed this week with Verizon falling 1.77 percent after holding up well last week when AT&T fell 3.2 percent.
  • Oneok Inc. was the worst performer in the S&P 500 this week declining 7.32 percent as the company missed quarterly earnings expectations.

Opportunity

  • The market continues to climb that proverbial wall of worry and just shakes off any bad news and rallies smartly on good news.
  • Global central banks are literally pulling out all the stops in an attempt to ignite economic growth. The European Central Bank cut interest rates again this week, which is a move in the right direction as far as the market is concerned.

Threat

  • A market consolidation wouldn’t be a surprise after a strong start to the year.
  • Expectations for cyclical areas of the market are low and allowing stocks to rally when companies just meet expectations. If the global economy were to deteriorate the market wouldn’t have much to fall back on.
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