Roundup: Index Summary and U.S. Markets

Index Summary

• The major market indices were lower this week. The Dow Jones Industrial Index fell 0.08 percent. The S&P 500 Stock Index dropped 0.78 percent, while the Nasdaq Composite finished 1.26 percent lower.
• Barra Growth underperformed Barra Value as Barra Value finished 0.72 percent lower while Barra Growth fell 0.84 percent. The Russell 2000 closed the week with a loss of 1.02 percent.
• The Hang Seng Composite finished lower by 1.86 percent, Taiwan gained 0.92 percent, and the Kospi advanced 0.39 percent.
• The 10-year Treasury bond yield closed at 3.68 percent, down 16 basis points for the week.

Domestic Equity Market

The figure above shows the performance of each sector in the S&P 500 index for the week. The best-performing sector was healthcare, up 1.5 percent. Other better-performing sectors include consumer staples and utilities. Under-performing sectors were telecom services, materials, and financials.

Within the healthcare sector, the best-performing stock was Boston Scientific Corp, up 4.8 percent. The other top-five outperforming stocks in the sector were Merck & Co, Mylan Inc, Pfizer Inc., and Wellpoint Inc.
Strengths

• The photographic products group was the best-performing group for the week, up 7 percent, led by its single member, Eastman Kodak Co. The company announced that it has filed lawsuits against Apple Inc and Research In Motion Ltd alleging the infringement of Kodak digital imaging technology.
• The hotels group outperformed, up 4 percent. A major brokerage firm analyst upgraded Wyndham Worldwide Corp to “Buy” from “Hold”. The analyst also had positive comments on the industry as a whole, citing the chance for some upside in revenue-per-available room, a key industry metric known as RevPAR.

Weaknesses

• The aluminum group was the worst-performing group, down 8 percent, led by its single member, Alcoa Inc. The company reported fourth quarter earnings which were below the analyst consensus estimate.
• The home entertainment software group was the second-worst performer, dropping 7 percent, led by its single member, Electronic Arts Inc. The video game publisher warned that its earnings for the December quarter are expected to be between 29 to 33 cents a share. Analysts had been expecting earnings of 56 cents. The company cited weakness in Europe, and that more of its North America sales came from games it distributes but does not produce--games which offer lower profit margins.
• The broadcasting group underperformed, losing 6 percent, led by its single member, CBS Corp. The stock sold down Friday during the market’s decline. Earlier in the week a brokerage firm initiated coverage of the stock with a “Hold” rating.

Opportunities

• There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010.
• The strength in the market since March could be an opportunity to eliminate weaker companies in the portfolio and upgrade to companies with better fundamental outlooks.

Threats

• Should investors’ expectations for an improving economy not come to fruition on a reasonable time frame, it could be a threat to stock prices.
• As governments around the world begin to wind-down the monetary and fiscal stimulus programs put in place during the economic crisis, it will likely present a headwind for stocks.