- The major market indices were down this week. The Dow Jones Industrial Index fell 4.02 percent. The S&P 500 Stock Index declined 4.23 percent, while the Nasdaq Composite finished 5.02 percent lower.
- Barra Growth underperformed Barra Value as Barra Value finished 4.15 percent lower while Barra Growth fell 4.31 percent. The Russell 2000 closed the week with a loss of 6.44 percent.
- The Hang Seng Composite finished lower by 4.72 percent; Taiwan was down 6.88 percent and the Kospi declined 5.63 percent.
- The 10-year Treasury bond yield closed at 3.24 percent, down 22 basis points for the week.
Domestic Equity Market Notebook (5/24/2010)
The figure shows the performance of each sector in the S&P 500 Index for the week. All ten sectors were down. The best-performing sector was telecom services, down only 2 percent. Other better-performing sectors included consumer staples and financials. The three worst-performing sectors were industrial, energy and technology.
Sprint Nextel Corp was the best-performing stock within the telecom services sector up 0.9 percent. Other top performers in the sector were Windstream Corp and Frontier Communications Corp.
Strengths
- The education services group was the best-performing group for the week, rising 5 percent. Investor sentiment on the group was improved by reports of the impending resignation of a Department of Education official by July 1. The official had been instrumental in shaping proposed rules that could negatively affect the industry.
- The metal & glass container group, led by Pactiv Corp, outperformed by gaining 4 percent. Media reports indicated that three different entities may have interest in acquiring the maker of consumer products including Hefty garbage bags.
- The retail automotive parts group outperformed, up 1 percent. Advance Auto Parts Inc. reported quarterly earnings exceeding the consensus analyst estimate, and it reaffirmed its 2010 earnings outlook. A brokerage firm upgraded the stock.
Weaknesses
- Three of the 10 worst-performing groups were in the energy sector (coal & consumable fuel, oil & gas storage & transportation, and oil & gas refining and marketing). These groups were down 9 to 12 percent. The price of crude oil declined during the week. There is investor concern that the European sovereign debt crisis may slow the global economy, resulting in lower demand for commodities including crude oil and gasoline.
- The gold group (Newmont Mining Corp) underperformed, losing 9 percent. The price of gold declined during the week.
- The consumer electronics group (Harman International Industries Inc) underperformed, losing 11 percent. The stock has been weak since reporting on April 29 that its revenue was expected to show a compounded annual growth rate of 7 to 10 percent through fiscal 2013. This is slower than its current pace.
Opportunities
- There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2010. Corporate liquidity is high, thereby providing the means to pursue acquisitions.
Threats
- Should investors’ expectations for an improving economy not come to fruition in 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.
