Index Summary
- The major market indices were lower this week. The Dow Jones Industrial Index fell 1.04 percent. The S&P 500 Stock Index dropped 1.64 percent, while the Nasdaq Composite finished 2.63 percent lower.
- Barra Growth underperformed Barra Value as Barra Value finished 1.09 percent lower while Barra Growth fell 2.19 percent. The Russell 2000 closed the week with a loss of 2.44 percent.
- The Hang Seng Composite finished lower by 3.63 percent; Taiwan lost 3.62 percent, and the Kospi declined 4.86 percent.
- The 10-year Treasury bond yield closed at 3.60 percent, down 2 basis points for the week.
Domestic Equity Market
The chart above shows the performance of each sector in the S&P 500 Index for the week. All of the sectors were down. The best-performing sector was financials, down 0.1 percent. Other better-performing sectors include consumer staples and consumer discretion. Underperforming sectors were materials, technology, and energy.
Within the financials sector the best-performing stock was Genworth Financial, up 11.5 percent. The other top five performers in financials were Zions Bancorp, Travelers Cos. Inc., Wells Fargo & Co., and Chubb Corp.
Strengths
- The photographic products group was the best-performing group for the week, up 39 percent, driven by its single member, Eastman Kodak Co. The company reported fourth-quarter profit that greatly exceeded the consensus estimate. It was the company's first profit in five quarters. The earnings were driven by consumer and commercial inkjet printer sales, leaner costs and royalties on digital-imaging technology.
- The homebuilding group outperformed, rising 4 percent. A major brokerage firm published a positive note on the homebuilders, reiterating an "attractive" view on the homebuilders, and noting that it sees upside to current valuations. The brokerage based its opinion, in part, on positive comments from builders about January home sales, which may bode well for a strong spring selling season and growth in new home sales in 2010.
- The automobile manufacturer group was among the outperformers, up 3 percent, driven by its single member, Ford Motor Co. The company reported fourth-quarter earnings significantly above the consensus estimate. Also, Ford may have an opportunity to gain from the recalls being made by Toyota Motor Corp.
Weaknesses
- The steel group underperformed, dropping 9 percent. United States Steel Corp. reported earnings below consensus, and it provided disappointing guidance. Investor concern over China starting to slow bank lending negatively affected the basic materials groups. A stronger dollar also weighed on the steel group.
- The home furnishings group was among the underperformers, down 9 percent, led by its single member, Leggett & Platt Inc. The company's fourth-quarter earnings report beat the consensus estimate, but the midpoint of the guidance for 2010 was below consensus.
- The communications equipment group underperformed, losing 7 percent, led down by its second-largest member, Qualcomm Inc. The firm's first-quarter earnings beat consensus, but guidance was disappointing. Competitive pricing in the cellular chip market was part of the reason for the reduced guidance.
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.
