Gold Market Radar (February 13, 2012)

Saturday, February 11th, 2012

Gold Market Radar (February 13, 2012)

For the week, spot gold closed at $1,722.00 down $4.25 per ounce, or 0.25 percent.  Gold stocks, as measured by the NYSE Arca Gold Miners Index, fell 3.29 percent. The U.S. Trade-Weighted Dollar Index was essentially flat with a gain of just 0.2 percent for the week.

Strengths

• Harmony Gold was one of the few companies to report strong operational quarterly results this week.  Gold production increased 5 percent to 345 thousand ounces in the quarter due to processing higher grades with reduced dilution, thus lowering the costs of production too.
• At the end of January, Harmony came to an agreement to sell its Evander mine in South Africa for $217 million in cash.  This transaction lowers Harmony’s South African exposure and puts a hefty cash injection into the company.
• The timing for both the operational improvements and the sale of Evander could not come a better time as Harmony owns 50 percent of the massive Wafi-Golpu gold-copper porphyry deposit in Papua New Guinea.  The latest drill results pulled a core length of 961 meters containing 1.37 percent copper and 1.39 grams per ton of gold.  While still early on, the average copper and gold grade for the deposit is higher than the company maker mines of Grasberg for Freeport McMoRan Copper and Gold and Oyu Tolgoi for Ivanhoe Mines.

Weaknesses

• Nevsun Resources had a terrible week, seeing its share price drop 38 percent.  Fortunately, we had very limited exposure to this company.
• What sent Nevsun’s share price tumbling was a near 50 percent cut in expected gold production in 2012 as its reserve calculation on contained gold content was significantly off the mark.
• Overall, price momentum in the gold sector faded this week and there were still a few new financings announced which tend to cap share prices in the short term.

Opportunities

• HSBC published a recent report on the investment case for gold titled “Gold Outlook, Sharpening the bull’s horn” which argues for an average gold price of $1,850 per ounce in 2012 with a price range of $1,450 to $2,050.
• While recent economic data has been positive, HSBC notes a survey by the World Economic Forum that shows global risks in 2012 are expected to increase. This, coupled with a general loss of investor confidence and eroding trust in the financial system and government policies have historically been supportive of higher gold prices.
• In a recent issue of Market Musings & Data Deciphering, David Rosenberg highlighted Japan’s recent announcement that it has been quietly intervening to weaken the yen. The U.S. and Europeans also have been intervening in the markets to achieve a more competitive currency relative to their peers.  David notes that getting the ratio of the gold price to global currency in circulation makes $3,000 gold quite attainable.

Threats

• Mark Cutifani, CEO of AngloGold Ashanti; Graham Briggs, CEO of Harmony; and Steven Letwin, CEO of IAMGOLD were recently interviewed by Mineweb at the Indaba Mining Conference in South Africa.  Mr. Cutifani noted that at a gold price of $1,650 per ounce miners are only just returning the weighted average cost of capital for the industry.
• Mr. Briggs confirmed Mark’s view on costs.  Mr. Letwin pointed out that many of the large low grade deposits considered for development would be very difficult to produce gold at less than $1,200 per ounce.
• Mark Bristow, CEO of Randgold, chimed in too that in much of the industry, the mined grade, the actual processing grade, is running higher than the reserve grade at the mines.  While companies are adding additional resources to the resource base because higher gold prices are being used to calculate lower cut off points for economics, those additional ounces are very marginal and higher prices will be needed if the world wants more gold.

Tags: Freeport Mcmoran, Freeport Mcmoran Copper, Freeport Mcmoran Copper And Gold, Gold Content, Gold Grade, Gold Market, Gold Miners, Gold Outlook, Gold Production, Gold Sector, gold stocks, Harmony Gold, Ivanhoe Mines, Market Radar, Nevsun Resources, Nyse Arca, Operational Improvements, Papua New Guinea, Price Momentum, Spot Gold
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U.S. Equity Market Radar (January 16, 2012)

Saturday, January 14th, 2012

U.S. Equity Market Radar (January 16, 2012)

The S&P 500 Index was higher this week by 0.88 percent. For the second week in a row, the best-performing sector was basic materials which rose 3.93 percent. Energy was the worst-performer, down 1.24 percent. Within the basic materials sector, top performers included Eastman Chemical, Freeport-McMoRan Copper and Gold, and CF Industries. The worst performers in energy included Cabot Oil & Gas, QEP Resources and EQT Corp.

Strengths

• Diversified metals and mining, led by Freeport-McMoRan, was the best-performing group for the week, up 7.9 percent. Improving sentiment surrounding China’s economic prospects drove copper up 6.3 percent this week.
• The auto parts and equipment group outperformed by gaining 7.5 percent. The group was led by Borgwarner, which issued better than expected earnings guidance for 2012.
• The homebuilding group also outperformed rising 7.5 percent. The group was led by Lennar, which reported a 20 percent increase in new orders.

Weaknesses

• The tire and rubber industry group (Goodyear Tire) was the worst-performing group, down 10.9 percent. Goodyear Tire noted recent weakness in volume trends globally.
• The home entertainment software group lost 8.4 percent on weakness in Electronic Arts. The stock dropped on reports that U.S. video game sales dropped 21 percent in December.
• The coal group fell 5.5 percent as sharply lower natural gas prices put pressure on thermal coal pricing. Consol Energy declined 11 percent.

Opportunities

• U.S. economic data remains surprisingly strong and increases the odds that economic momentum can be maintained.

Threats

• An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.

Tags: Borgwarner, Cabot Oil, Cf Industries, Consol Energy, Eastman Chemical, Economic Momentum, Economic Prospects, Eqt, Equipment Group, Freeport Mcmoran, Freeport Mcmoran Copper, Freeport Mcmoran Copper And Gold, Goodyear Tire, Home Entertainment Software, Market Radar, Natural Gas Prices, Performing Group, Thermal Coal, Video Game Sales, Volume Trends
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Energy and Natural Resources Market Cheat Sheet (November 7, 2011)

Sunday, November 6th, 2011

Energy and Natural Resources Market Cheat Sheet (November 7, 2011)

Strengths

• The Global Resources Fund performed in line with the benchmark for the week.  The NYSE Arca Gold Miners Index, Oil Exploration & Production and the Metals and Mining index were among the few indices positive for the week.  With continual uncertainty around the state of the Eurozone, despite some clarity earlier on this week, investors sought refuge in gold.  The fund’s exposure to the precious metal helped to reduce downside risk.  The indices were up 1.4 percent, 0.86 percent and 0.9 percent respectively.
• Roubini Global Economics highlighted that oil prices rallied in October, narrowing the Brent-WTI spread, with WTI appreciating over 24 percent to $94.2 per barrel and Brent rising by 11 percent to nearly $111 per barrel.  Oil and oil product inventories drew down to below their five-year average, as did growth, which was surprising on the upside at an annualized adjusted rate of 2.5 percent for third quarter.
• Bloomberg reported that the number of India’s power stations with coal stockpiles of fewer than four days’ normal use has tripled in two months, prompting electricity-supply cuts and threatening to curb growth in Asia’s third-biggest economy.  Coal output in India was disrupted with monsoon rains flooding mines and a workers’ strike.  The country’s stockpiles dropped from 70.9 million metric tons of coal on October 18 to 8.1 million tons on November 1, also representing a 33 percent decline from the first of September.

Weaknesses

• Considerable weakness relative to other indices was seen among construction materials, alternative energy and the Baltic Dry Shipping Index, all down 4.39, 4.82 and 4.17 percent, respectively for the week.
• Freeport-McMoRan Copper & Gold’s Grasberg mine in Indonesia is operating at only 5 percent of its capacity of 230,000 tons of ore per day, according to the director general of mineral resources and coal at the Energy Ministry. This works out to a loss of over 1,600 tons per day of copper-in-concentrate. Freeport recently declared force majeure on shipments of copper concentrates as a result of an increasingly acrimonious strike over pay and conditions that is now into its sixth week. Grasberg is the world’s second-largest copper mine equal to around 4 percent of global output and is also one of the world’s largest gold mines.
• A Bloomberg report highlighted that Brazil’s industrial sector has been the hardest hit by Europe’s debt crisis and slowing growth in the U.S.  The economic activity index, a proxy for gross domestic product, contracted 0.53 percent in August, its biggest monthly drop since the global financial crisis of 2008.  It dropped further for the month of September, posting its second steepest decline since the financial crisis, sparking the central bank’s argument for more interest-rate cuts in Latin America’s largest economy.

Opportunities

• Global copper supply remains challenged.  Xstrata estimates 2011 global copper mine output growth to be the weakest since 2002, with mine production to rise by only 40 kilotons this year.
• McKinsey Quarterly published a piece examining the oil industry and whether or not supply growth could accelerate to meet global demand.  The report highlighted that despite high oil prices for much of the past decade and surging investment outlays by many major private and national oil companies alike, capacity has only risen by more than 1 percent a year during that time.  The company’s current projection suggests that the world could reach a realistic supply capacity of around 100 million barrels a day by 2020, which is an increase from 91-92 million barrels per day today.  This number, however, would barely satisfy the roughly 100 million barrels of liquids the world would consume each in day in such a scenario, which is up from 88-89 million today.

Threats

• Bloomberg reported that Brazil plants to limit the expansion of mining companies with concessions in sizeable areas as part of new mining rules.  It has been speculated that this may affect companies, such as Vale SA, negatively.  Vale is a Brazilian diversified mining multinational corporation and one of the largest logistics operators in the country.  It is the largest producer of iron ore, pellets, and second largest of nickel.
• Roubini Global Economics is assigning a 60 percent probability to a recession in developed markets in 2012.  The firm believes this will cap the recent surge in crude prices despite OPEC output tightening in the wake of Libyan supply entering the market.
• ArcelorMittal SA, the world’s number one steelmaker, said that a summer dip in demand is now extending into a second-half slump, with even lower steel shipments and prices in the fourth quarter, leading it to scrap some investment plans.  ArcelorMittal globally supplies between 6 and 7 percent of steel.  It is attributing this to economic uncertainties, the risk of recession in developed markets, and policy tightening in China, and is causing customers to be increasingly cautious.

Tags: Barrel Oil, Brazil, Coal Output, Crude Oil, Downside Risk, Electricity Supply, Eurozone, Freeport Mcmoran, Freeport Mcmoran Copper, Global Economics, Global Resources, Gold, Gold Miners, Grasberg Mine, Index Oil, India, Million Metric Tons, Monsoon Rains, Nyse Arca, Oil Product, Product Inventories, Resources Fund, Shipping Index, Wti
Posted in Brazil, Gold, India, Markets, Oil and Gas | Comments Off

U.S. Equity Market Cheat Sheet (October 31, 2011)

Monday, October 31st, 2011

U.S. Equity Market Cheat Sheet (October 31, 2011)

The domestic stock market as measured by the S&P 500 Index was 3.78 percent higher this week, driven by improving investor sentiment as European leaders put forth a package of measures intended to rework their bailout fund, recapitalize European banks and reduce Greece’s debt.

All ten sectors of the S&P 500 increased. The best-performing sector for the week was materials, which increased 7.87 percent. Other top-three sectors were financials and energy. Consumer staples was the worst performer, up only 0.22 percent. Other bottom-three performers were utilities and consumer discretion.

Within the materials sector, the best-performing stock was Allegheny Technologies, up 23.79 percent. Other top-five performers were Cliffs Natural Resources, U.S. Steel Corp., Freeport-McMoRan Copper & Gold and AK Steel.

Strengths

• The real estate services group was the best-performing group for the week, up 24 percent on the strength of its only member, CBRE Group. The company, formerly known as CB Richard Ellis Group, reported earnings in-line with the consensus estimate and revenue above the consensus. The stock had been weak recently due to investor concern over potential weakness in commercial real estate due to a potentially slowing economy. However, the stock surged this week as investor sentiment improved.
• The coal & consumable fuel group gained 18 percent, with all three group members contributing to the gain. Consol Energy reported quarterly earnings and sales above the consensus estimates. Peabody Energy reported results roughly in-line with the consensus.
• The diversified metals & mining group outperformed, up 17 percent. The group was led by its largest member, Freeport-McMoRan Copper & Gold, which benefited from higher copper and gold prices during the week.

Weaknesses

• Household appliances was the worst-performing group for the week, down 10 percent on weakness of the group’s only member, Whirlpool. The appliances manufacturer reported earnings and revenue below the consensus estimate.
• The personal products group lost 7 percent on weakness in member Avon Products, which reported quarterly sales and earnings below the consensus estimate.
• The internet retail group underperformed, down 6 percent, led down by members Amazon.com and Netflix. Amazon reported earnings below the consensus estimate. Netflix, on the other hand, beat estimates on earnings, but disclosed that the company had lost 800,000 subscribers during the third quarter due to a price increase. The company also guided fourth quarter earnings well below analyst expectations.

Opportunities

• There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

Threats

• A mid-cycle slowdown in the domestic economy would be negative for stocks.
• An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.

Tags: Allegheny Technologies, Cb Richard Ellis, Consensus Estimate, Consol Energy, Consumer Staples, Domestic Stock Market, Ellis Group, Estate Services Group, European Banks, Freeport Mcmoran, Freeport Mcmoran Copper, Fuel Group, Gold, Gold Prices, Household Appliances, Investor Concern, Investor Sentiment, Materials Sector, Peabody Energy, Performing Group, Quarterly Earnings
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U.S. Equity Market Cheat Sheet (October 11, 2011)

Monday, October 10th, 2011

U.S. Equity Market Cheat Sheet (October 11, 2011)

The domestic stock market as measured by the S&P 500 Index was higher this week by 2.12 percent. The figure below shows the performance of each sector in the index for the week. Eight sectors increased and two declined. The best-performing sector for the week was materials, which increased 6.21 percent. Other top-three sectors were consumer discretion and energy. Telecom services was the worst performer, down 1.36 percent. Other bottom-three performers were utilities and financials.

Within the materials sector, the best-performing stock was Monsanto, up 18.14 percent. Other top-five performers were Freeport-McMoRan Copper & Gold, Dow Chemical, Cliffs Natural Resources, and CF Industries Holdings.

Strengths

• The fertilizers & agricultural chemicals group was the best-performing group for the week, gaining 13 percent, led by its largest member, Monsanto. The firm reported fourth quarter earnings and revenue above consensus estimates. Also, a major brokerage firm upgraded the stock from neutral to overweight.
• The oil & gas refining & marketing group outperformed, up 13 percent. All four of the group members (Valero Energy, Marathon Petroleum, Sunoco, and Tesoro) rose.

• The diversified metals & mining group rose 11 percent on strength in the group’s largest member, Freeport-McMoRan Copper & Gold. The price of copper increased for the week.

Weaknesses

• Three of the real estate investment trust (REIT) groups (diversified REITs, office REITs, and industrial REITs) were among the ten worst-performing groups, down between 3 percent and 6 percent. Investors likely were expressing concern that the recovery in commercial real estate might be imperiled by potential softness in the global economy.

• The airlines group underperformed, losing 4 percent, led by its single member, Southwest Airlines. Airlines in general sold off on Monday on rumors that American Airlines was facing a possible bankruptcy.
• The diversified support service group lost 4 percent on weakness in its largest member, Iron Mountain. One brokerage firm downgraded the stock to neutral from outperform, and another brokerage firm lowered its target price on Iron Mountain.

Opportunities

• There may be an opportunity for gain in merger & acquisition transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

Threats

• A mid-cycle slowdown in the domestic economy would be negative for stocks.
• An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.

Tags: Agricultural Chemicals, American Airlines, Brokerage Firm, Cf Industries, Cf Industries Holdings, Chemicals Group, Domestic Stock Market, Dow Chemical, Estate Investment Trust, Fourth Quarter Earnings, Freeport Mcmoran, Freeport Mcmoran Copper, Gold, Materials Sector, Mining Group, Performing Group, Price Of Copper, Real Estate Investment, Real Estate Investment Trust, Southwest Airlines, Valero Energy
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Energy and Natural Resources Market Cheat Sheet (October 3, 2011)

Sunday, October 2nd, 2011

Energy and Natural Resources Market Cheat Sheet (October 3, 2011)

Strengths

• The Global Resources Fund performed well this week due to its defensive positioning in the portfolio.
• On a relative basis, asset allocation and stock selection among food and grain processors helped to limit downside risk to the fund. Additionally, weighting in senior precious metals also played a role in limiting a decline.
• Despite a sell-off in copper prices and poor sentiment towards mining stocks this week, M&A remains active. Minmetals Resources agreed to buy Anvil Mining for $1.3 billion cash, gaining three copper mines in the Democratic Republic of Congo, which may produce 60,000 metric tons of copper cathode annually from next year.

Weaknesses

• Copper fell almost 5 percent to a 13-month low on Wednesday, plummeting from ongoing European fears. Copper’s drop came despite a 21 percent jump in Chinese imports in August. Gold had dropped almost 2 percent and wheat 5 percent.
• Freeport McMoRan Copper and Gold continues to experience ongoing strikes at two of their properties. Mining Weekly reported that up to 1500 workers in Indonesia’s Freeport remote Papua province protested outside a government office on Thursday, while workers went on strike that same day at the Peruvian Cerro Verde mine. This is third stoppage at Freeport this month. The company still maintains that the labor concerns have had no effect on output. Freeport’s shares were at a 15-month low as it weathers these two strikes.
• Crude oil is headed for its largest quarterly drop in 15 months over concerns of global economic slowdown.
• HSBC highlighted that September data signaled continued stagnation of China’s manufacturing sector. After adjusting for seasonal variation, the HSBC Purchasing Managers Index held steady at 49.9 in September. Moreover, the index averaged its lowest quarterly reading since the first quarter of 2009. Despite manufacturing production in China continuing to rise during September, panelists attributed the subdued increase in production to fewer intakes of new business and decreased demand conditions.

Opportunities

• The Don Coxe Strategy Journal recommended an investment strategy of maintaining heavy weighting in agricultural stocks. Despite having high volatility, the endogenous risk in their earnings is well below those of most cyclical stocks – commodities and otherwise. He also recommended retaining strong exposure to U.S. oil producers operating on land. The spread between West Texas Intermediate and Brent oil, and U.S. and European natural gas prices, remains. Coxe says that at the moment, energy is the most conspicuous competitive advantage the U.S. possesses.
• The CEO of Anglo American gave an upbeat statement this week regarding current and forward-looking demand conditions. The company stated that demand from China continues to be robust and that it doesn’t expect any of its clients to cancel orders for the next 18 months to two years in their nickel and iron ore businesses.

Threats

• Should we continue to see excessive volatility in the markets, we could potentially experience a global sell-off. Worldwide negative sentiment remains present, as ongoing concerns surrounding the global sovereign debt issues, leading investors to lose confidence in global policymakers.
• After recently swearing in Michael Sata as Zambia’s new president, the new Mines Minister Wilbur Simusa reportedly said that the tax the country is receiving from Africa’s top copper producers is not enough and may need to be reconsidered. Reuters highlighted that copper mining is Zambia’s economic mainstay and any plans to increase the tax could hurt the industry target of doubling annual copper output to 1.5 million tons by 2015.

Tags: Anvil Mining, August Gold, Cerro Verde, Commodities, Copper Cathode, Copper Mines, Copper Prices, Crude Oil, Democratic Republic Of Congo, Downside Risk, European Fears, Freeport Mcmoran, Freeport Mcmoran Copper, Freeport Mcmoran Copper And Gold, Global Economic Slowdown, Gold, Grain Processors, Labor Concerns, Papua Province, Purchasing Managers Index, Relative Basis, Seasonal Variation, Two Strikes
Posted in Commodities, Gold, Markets, Oil and Gas | Comments Off

U.S. Equity Market Cheat Sheet (May 30, 2011)

Sunday, May 29th, 2011

U.S. Equity Market Cheat Sheet (May 30, 2011)

The figure below shows the performance of each sector in the S&P 500 index for the week. Three sectors gained, and seven sectors declined. The best-performing sector for the week was materials which rose 2.07 percent. Other top-three sectors were energy and telecom services. Utilities were the worst performer, down 1.65 percent. Other bottom-three performers were healthcare and consumer staples.

Within the materials sector the best-performing stock was CF Industries Holdings which rose 11.6 percent. Other top-five performers were AK Steel Holding, Freeport-McMoRan Copper & Gold, Monsanto, and Newmont Mining.

Strengths

• The diversified metals & mining group was the best-performing group for the week, up 7 percent, led by its single member, Freeport-McMoRan Copper & Gold. The prices of copper and gold were both up for the week.
• The fertilizer & agricultural chemicals group outperformed, up 6 percent, driven by strength in both of its members (Monsanto and CF Industries Holdings). Corn prices are up from their May low. A major brokerage firm upgraded CF Industries from “Neutral” to “Overweight,” citing its valuation, solid cash low characteristics, strong crop prices, and a favorable outlook for agricultural fundamentals in the year ahead.
• The specialty stores group outperformed, rising 5 percent. Tiffany & Company advanced sharply after reporting quarterly earnings and revenue above the consensus estimates. The firm also raised its earnings guidance for the full year.

Weaknesses

• The healthcare services group was the worst performer, down 4 percent, led by Medco Health Solutions. Pharmacy benefits manager Medco said that, after this year, it will lose its contract to handle mail order and specialty drug benefits for the Federal Employees Health Benefits Program, a program that provides it with about $3 billion a year in revenue.
• The airlines group underperformed, losing 4 percent on weakness in the stock of its single member, Southwest Airlines. High winds and hail affected the air traffic pattern in Dallas this week. Southwest said it expected to cancel or delay an undetermined number of flights as it checks eight aircraft for damage.
• The electronic equipment & instruments group fell 3 percent on weakness in its single member, FLIR Systems. The company said it will pay two former executives $39 million to settle claims over the firm’s use of infrared technology obtained through a past acquisition.

Opportunities

• There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

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.
• The end of quantitative easing currently scheduled by the Federal Reserve for the end of June might result in a weaker economy.
• The nuclear disaster in Japan creates uncertainly, which is not good for stock prices.

Tags: Agricultural Chemicals, Ak Steel Holding, Amp Company, Cf Industries, Cf Industries Holdings, Chemicals Group, Consumer Staples, Corn Prices, Favorable Outlook, Federal Employees Health, Federal Employees Health Benefits, Federal Employees Health Benefits Program, Freeport Mcmoran, Freeport Mcmoran Copper, Health Benefits Program, Healthcare Services Group, Mail Order, Medco Health, Medco Health Solutions, Newmont Mining
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U.S. Equity Market Cheat Sheet (April 25, 2011)

Sunday, April 24th, 2011

Domestic Equity Market

The figure below shows the performance of each sector in the S&P 500 Index for this holiday-shortened week. Eight sectors increased and two decreased. The best-performing sector for the week was technology which rose 2.99 percent. Other top-three sectors were materials and energy. Telecom services was the worst performer, down 0.67 percent. Other bottom-three performers were financials and consumer staples.

Within the technology sector, the best-performing stock was F5 Networks which rose 12.86 percent. Other top-five performers were JDS Uniphase, Apple, Qualcomm and Western Digital.

Strengths

• The consumer electronics group was the best performer for the week, rising 7 percent, led by its single member, Harman International Industries. The company announced that it had been chosen to supply branded audio solutions for certain automotive applications for Geely Motors of China, BYD Motors of China, and for a joint venture formed by BYD Motors of China and Daimler, AG.
• The diversified metals & mining group was the second-best performer, up 7 percent, led by its single member, Freeport McMoRan Copper & Gold. The company reported quarterly earnings which handily exceeded the consensus estimate. Also, the price of copper and the price of gold increased during the week.
• The computer hardware group outperformed, gaining 6 percent. Apple, the largest member of the group, reported quarterly earnings and revenue above the consensus estimates.

Weaknesses

• The motorcycle manufacturer group was the worst performer, down 6 percent on weakness in the group’s single member, Harley Davidson. The company reported quarterly earnings above the consensus estimate, but its U.S. sales declined 0.5 percent year-over-year.
• The diversified support service group underperformed, losing 5 percent on weakness in the stock of its largest member, Iron Mountain. The stock had risen strongly over the last month since an activist shareholder laid out proposals to drive operational improvement. On Tuesday the firm laid out its strategic plan for enhancing shareholder value. The stock sold off after the plan was announced, so it appears that the projected improvements may have already been priced into the stock.
• The diversified banks group lost 4 percent. All three members of the group (Wells Fargo, U.S. Bancorp, and Comerica) sold off after reporting earning this week. In general, banks are being challenged by slow revenue growth.

Opportunities

• There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

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.
• Quantitative easing currently being implemented by the Federal Reserve might result in unintended consequences.
• The nuclear disaster in Japan creates uncertainly, which is not good for stock.prices.

Tags: Audio Solutions, Company Announced That, Consensus Estimate, Consumer Electronics Group, Consumer Staples, Daimler Ag, Domestic Equity, F5 Networks, Freeport Mcmoran, Freeport Mcmoran Copper, Geely Motors, Gold, Hardware Group, Harman International, Harman International Industries, Jds Uniphase, Mining Group, Motorcycle Manufacturer, Price Of Copper, Price Of Gold, Quarterly Earnings
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U.S. Equity Market Cheat Sheet (April 11, 2011)

Sunday, April 10th, 2011

U.S. Equity Market Cheat Sheet (April 11, 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 consumer staples which rose 0.51 percent. Other top-three sectors were materials and healthcare. Industrials was the worst performer, down 1.44 percent. Other bottom-three performers were telecom services and consumer discretion.

Within the consumer staples sector, the best-performing stock was Dean Foods which rose 5.09 percent. Other top-five performers were Constellation Brands, Supervalu, CVS Caremark and Costco Wholesale.

Strengths

• The home furnishings retail group was the best-performing group for the week, up 10 percent, led by its single member, Bed Bath & Beyond. The firm reported quarterly earnings which handily beat the consensus forecast, and it guided earnings for the current fiscal year above the consensus forecast.
• The gold group was the second-best performer, gaining 7 percent on the strength of its single member, Newmont Mining. The price of gold increased during the week.
• The diversified metals & mining group outperformed, increasing by 4 percent. The stock of the group’s largest member, Freeport McMoRan Copper & Gold, increased as the prices of copper and gold increased.

Weaknesses

• The airlines group was the worst-performing group, losing 8 percent on weakness in the group’s single member, Southwest Airlines. Airlines sold off as the price of crude oil rose to a new 12-month high.
• The fertilizers & agricultural chemicals group underperformed, down 8 percent, led by its largest member, Monsanto. The firm reported fiscal second quarter earnings above the consensus estimate, but it reiterated its earnings forecast for the current fiscal year, a level which was below the analyst consensus.
• The motorcycle manufacturers group lost 6 percent, led down by its single member, Harley-Davidson. A major brokerage firm report estimated that Harley-brand U.S. retail sales at the dealer level decreased 6 percent year-over-year during March.

Opportunities

• There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

Threats

• Should investors’ 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.
• The nuclear disaster in Japan creates uncertainly, which is not good for stock prices.

Tags: Agricultural Chemicals, Analyst Consensus, Chemicals Group, Consensus Estimate, Constellation Brands, Consumer Staples, Costco Wholesale, Dean Foods, Freeport Mcmoran, Freeport Mcmoran Copper, Gold, Gold Group, Manufacturers Group, Mining Group, Motorcycle Manufacturers, Newmont Mining, oil, Performing Group, Price Of Crude Oil, Quarterly Earnings, Second Quarter Earnings, Southwest Airlines
Posted in Energy & Natural Resources, Gold, Markets, Oil and Gas | Comments Off

U.S. Equity Market Cheat Sheet (March 21, 2011)

Saturday, March 19th, 2011

U.S. Equity Market Cheat Sheet (March 21, 2011)

The figure below shows the performance of each sector in the S&P 500 Index for the week. One sector increased and nine decreased. The best-performing sector for the week was energy which rose 0.37 percent. Other top-three sectors were materials and telecom services. Utilities was the worst performer, down 4.3 percent. Other bottom-three performers were technology and consumer discretion.

Within the energy sector the best-performing stock was Southwestern Energy which rose 11 percent. Other top-five performers were Peabody Energy, Consol Energy, Cabot Oil & Gas, and Range Resources Corp.

Strengths

• The coal & consumable fuel group was the best-performing group for the week, up 10 percent. All three stocks in the group increased for the week as investors appeared to seek out coal stocks in the expectation that coal usage for power plants would increase due to uncertainty over the future of nuclear power as a result of the damage to the nuclear plant in Japan.
• The diversified metals & mining group outperformed, rising 4 percent, led by its largest member, Freeport McMoRan Copper & Gold. A major brokerage firm reiterated its “outperform” rating on the stock, citing their view that the shares are pricing in a lower copper price than they believe is warranted. The price of copper increased during the week.
• The construction & farm machinery group rose 3 percent, led by its largest member Caterpillar, which reported that retail sales were up 59 percent in the three months ended in February, an acceleration from the 49 percent gain reported for the three months ended in January. It was the tenth-straight month of improving sales.

Weaknesses

• The footwear group was the worst-performing group for the week, down 11 percent, led by its single member, Nike. The firm reported third-quarter earnings below the consensus estimate, and it said that gross margins fell 1.1 percentage points in the third quarter. Also, margins are expected to narrow by 3 percentage points in the fourth quarter and continue to decline in the next fiscal year. The company has been hurt by higher product costs, elevated freight costs, and a smaller proportion of license revenue.
• The apparel & accessories group declined 9 percent, led by Coach and Polo Ralph Lauren. Luxury goods retailers sold off in response to the nuclear power plant disaster in Japan.
• The electronic manufacturing services group underperformed, falling 8 percent. Group members Jabil Circuit and Molex sold off after electronics contract manufacturer Sanmina-SCI warned that its fiscal second quarter ending in March will be below analysts estimates.

Opportunities

• There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

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.
• Quantitative easing (QE2) currently being implemented by the Federal Reserve might result in unintended consequences.
• The nuclear disaster in Japan creates uncertainly, which is not good for stock prices.

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