Posts Tagged ‘Memorandum Of Understanding’

U.S. Equity Market Cheat Sheet (March 7, 2011)

Sunday, March 6th, 2011

U.S. Equity Market Cheat Sheet (March 7, 2011)

The figure below shows the performance of each sector in the S&P 500 Index for the week. Six sectors increased and four decreased. The best-performing sector for the week was healthcare which rose 2.43 percent. Other top-three sectors were utilities and energy. Financials was the worst performer, down 1.6 percent.  Other bottom-three performers were telecom services and technology.

Within the healthcare sector, the best-performing stock was Agilent Technologies Inc which rose 10.36 percent. Other top-five performers were Davita Inc., Waters Corp., Coventry Health Care Inc., and Biogen Idec Inc.

S&P 500 Economic Sectors

Strengths

  • The casinos & gaming group was the best-performing group for the week, up 6 percent on strength in Wynn Resorts, Ltd. Gambling revenue in Macau rose 48 percent in February from a year earlier.
  • The coal & consumable fuel group outperformed, rising 5 percent. This was apparently driven by a report that a coal producer may have agreed to a record $330 per metric ton hard coking coal price for the April-June quarter, a price that was apparently above market expectations.
  • Four of the top ten best-performing groups (life science tools, managed healthcare, healthcare technology, and pharmaceuticals) were in the healthcare sector. These four groups were up in a range of 2 to 5 percent.

Weaknesses

  • The thrifts & mortgage finance was the worst-performer, down 9 percent on weakness in Hudson City Bancorp. The company said that it expected to receive a memorandum of understanding from the federal Office of Thrift Supervision that may require it to reduce its level of interest-rate risk and funding concentration.
  • The special consumer services group lost 5 percent, led down by its single member, H&R Block Inc. A Barron’s online article this week stated that options investors are building bearish options positions that would increase in value if shares of H&R Block sold off in response to a March 9 earning report and the tax-season updates on April 7 and April 25.
  • The hotels group was down 4 percent. Group member Carnival Corp. sold off after a regulatory filing showed that the cruise line operator’s chief operating officer sold 180,000 shares.

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.

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Gold Market Diary (4/5/2010)

Monday, April 5th, 2010

Gold Market Diary (4/5/2010)

For the week, spot gold closed at $1,126.80 per ounce, up $19.30, or 1.7 percent. Gold equities, as measured by the XAU Gold & Silver Index climbed 8.2 percent. The U.S. Trade-Weighted Dollar Index fell 1.7 percent.

Strengths

  • The gold price climbed for a third week in a row.
  • While the S&P 500 Index gained 5.4 percent in the first quarter, putting in four quarters of consecutive gains, its momentum is starting to wane as each successive quarterly return has been lower. At the same time, most Wall Street strategists are calling an end to economic worries and trying to make the case for investors to get long equities after the easy money has been made.
  • A recent case in point: strategist calls at two of the biggest banks ended their bets on a falling-dollar trade last week as their recommendation lost 2.8 percent.

Weaknesses

  • Home prices rose 3 percent in March, marking the eighth straight month of gains, but home prices are still down 0.7 percent over the past year. While this may be the smallest annual decline in three years, it is still a decline and suggests it may be too early to call a bottom.
  • Despite the growth in consumer confidence this month, most consumers are still pessimistic about the future of the current business and labor conditions.

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Opportunities

  • China’s largest bank by assets and the World Gold Council have agreed to combine forces to formulate new gold investment products and programs. The Memorandum of Understanding will continue to push gold as an investment for its general population.
  • The World Gold Council noted that gold consumption for the next 10 years in China is expected to double (see Frank Holmes commentary in this Investor Alert). If such predictions were to unfold, known gold reserves in China would be depleted in just six years.

Threats

  • California’s state treasurer sent letters to the major investment banks reminding them that California is a big part of their business when it comes to debt issuance. Bill Lockyer wrote “I do, however, worry about firms selling our bonds, on one hand, and trading (credit default swaps) on our bonds, or otherwise participating in the market, on the other.”
  • In the letter, Lockyer made specific inquiries into the banks’ role in the credit default swap markets and whether this activity could adversely affect the California debt issuance and the borrowing cost paid by taxpayers.
  • These comments are in the same vein as Greece’s prime minister calling for an end to the CDS market on its debt because it was driving up borrowing costs. Sovereign credit risks, international and domestic, remain a serious issue and will not go away simply by not pricing that risk in a public market.

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