U.S. Equity Market Radar (May 28, 2012)
The S&P 500 Index bounced back this week, rising 1.74 percent. The materials, consumer discretionary and industrials sectors led the way, all rising by more than 2 percent. The defensive areas that have recently outperformed were the laggards this week as telecommunication services, health care and utilities all rose less than one percent.
Strengths
- The materials sector was led by strong broad based gains in the chemical sector. Standout performers in Sherwin-Williams, Eastman Chemical and FMC Corp. While company-specific news was a driver, the larger positive trend in chemicals was the declining feedstock cost as oil moves lower and natural gas prices remained depressed.
- Within the consumer discretionary sector, online travel companies and homebuilders stand out. Expedia and Tripadvisor were among the best performers on optimism regarding Europe. Home builders Pulte Group and Lennar were strong on the back of better-than-expected new home sales data.
- The best individual stock performer this week was Cooper Industries which rose 27.5 percent as it agreed to be acquired by Eaton Corp.
Weaknesses
- All S&P 500 sectors were higher this week but the relative laggard was telecommunication services which saw AT&T and Verizon post small declines after recent outperformance.
- At the industry level, computer storage and peripherals was the worst performer as NetApp fell by more than 13 percent on disappointing sales outlook.
- Dell was the worst performer in the S&P 500 this week, falling by more than 15 percent on disappointing quarterly results.
Opportunity
- As mentioned last week, airlines and gold stocks continued their positive trajectory and were among the best performers again this week. European concerns and lower oil prices were the primary drivers.
Threat
- The U.S. remains a bright spot in the global economy and external shocks from Europe or Asia can’t be ruled out.
