Equity Market
The S&P 500 finished lower this week on global central bank policy uncertainty. The traditionally defensive groups were the best performers in an otherwise sloppy market.
Strengths
- The telecom services sector was the leader for a second week in a row with AT&T and Verizon both continuing to grind higher after their recent sell-off.
- The health care sector was the second best performer, posting essentially flat performance for the week. Leaders were from a variety of industries, but outperformers included CR Bard, AmerisourceBergen and Pfizer.
- Gannett was the best performer in the S&P 500 this week gaining 20.20 percent. The company announced the acquisition of Belo, which solidifies Gannett’s position in the TV affiliate space and further diversifies the business.
Weaknesses
- The financials sector was the worst performer this week. Household names such as American Express, Citigroup and Morgan Stanley were among the worst performers.
- The energy sector also lagged this week as coal names were especially weak with Peabody Energy falling more than 10 percent and CONSOL Energy falling 5 percent. Coal prices remain very depressed and are pressuring many companies in the industry.
- First Solar was the worst performer in the S&P 500 this week, declining 15.78 percent. The company announced a secondary equity offering totaling $391 million, resulting in roughly 9 percent dilution.
Opportunity
- The current macro environment remains positive, as economic data remains robust enough to give investors confidence in an economic recovery, but not too strong as to force the Federal Reserve to change course in the near term.
- The market pulled back 5 percent and bounced right on cue, as it has done all year.
Threat
- A market consolidation could continue in the near term, as the S&P 500 had trended higher beyond its all-time record for a month, defying the proverbial “Sell in May” seasonal pattern.
- Mortgage rates stayed above 4 percent this week, and if housing were to slow down or pause for a period of time, that could be a significant drag for both the real economy and the markets.
