U.S. Equity Market Cheat Sheet (January 31, 2011)
The figure below shows the performance of each sector in the S&P 500 Index for the week. Three sectors increased and seven decreased. The best-performing sector for the week was energy which rose 1.16 percent. Other positive sectors were materials and technology. Healthcare was the worst performer, down 1.8 percent. Other bottom performers were consumer discretion and consumer staples.
Within the energy sector, the best-performing stock was Baker Hughes, Inc., up 14.11 percent. Other top-five performers were Halliburton Co., Helmerich & Payne, Inc., Massey Energy Co., and El Paso Corp.
Strengths
- The electronic component group was the best-performing group for the week, up 11 percent. Corning, Inc. increased after reporting quarterly earnings. Its Specialty Materials sales increased 24 percent sequentially and 79 percent year-over-year, driven by strong sales in Corning Gorilla Glass, a scratch-resistant glass used in smartphone and tablet computer screens. Amphenol Corp. increased after reporting that its board of directors had approved a stock repurchase program.
- The industrial REITs (real estate investment trusts) group rose 7 percent, led by its single-member, ProLogis. The company and AMB Property Corp. announced they were in discussions regarding a potential merger.
- Two of the top ten groups were in the energy sector (oil & gas equipment & services, up 7 percent, and oil & gas refining & marketing, up 5 percent). These increases were driven by strong earnings reports from Baker Hughes, Inc. and Halliburton Co. in equipment & services, and Valero Energy Corp. in refining & marketing.
Weaknesses
- The automobile manufacturers group was the worst-performing group, losing 9 percent. The groupās single member, Ford Motor Co. reported earnings below the analyst consensus estimate.
- The special consumer services group underperformed, down 9 percent, led by its single member, H&R Block, Inc. This group was the best-performing group last week, so some profit-taking by investors might have occurred.
- The employment services group was down 6 percent. Its single member, Robert Half International, Inc., issued first quarter earnings guidance below the consensus estimate. The firm said it expects a sequential reduction in gross margins in its temporary employment business, mainly hurt by higher state unemployment rates.
Opportunities
- There may be an opportunity for gain in merger and acquisition (M&A) transactions in 2011. Corporate liquidity remains high, thereby providing the means to pursue acquisitions.
Threats
- Should investorsā expectations for an improving economy not come to fruition on a reasonable timeframe, it could be a threat to stock prices.
- Quantitative easing currently being implemented by the Federal Reserve might result in unintended consequences.
