U.S. Equity Market Radar (July 23, 2012)

Saturday, July 21st, 2012

U.S. Equity Market Radar (July 23, 2012)

The S&P 500 Index rose 0.43 percent this week as the second quarter earnings season kicked off in earnest this week. Energy, technology and materials outperformed as cyclical areas outperformed. Financials were the big underperformers this week, falling more than two percent on disappointing earnings reports.

Strengths

• The energy sector was the best performer this week, rising 2.56 percent and is now the best-performing sector over the past month. Oil & gas drilling and equipment were the best performers, led by Baker Hughes and Schlumberger on the back of strong earnings reports and low expectations.
• The technology sector was led higher by the computer storage and equipment industry group along with internet software and services. SanDisk, eBay and Google were all standout performers on strong earnings reports.
• The best individual stock performer this week was SanDisk, which rose 10.38 percent as the company reported earnings and an outlook that positively surprised street expectations.

Weaknesses

• The financial sector lagged as heavyweights Bank of America, JPMorgan Chase and Morgan Stanley all fell sharply. Earnings or guidance disappointments were the primary culprits, but after a relief rally on last week’s earnings, JPMorgan Chase gave it all back this week falling by more than 6 percent.
• The consumer staples sector was brought down by record high grain prices which negatively impact “protein” companies such as Tyson, which fell 6.56 percent, as well as packaged goods companies such as ConAgra Foods, which fell 4.55 percent.
• Chipotle Mexican Grill was the worst performer, falling 19.21 percent as second quarter sales were less than expected.

Opportunity

• It is all about earnings right now with another heavy week scheduled for next week. While the week ended on a sour note, the market has weathered the current environment pretty well considering expectations coming into the week.

Threat

• While policy-makers in Europe have made strides to stabilize the situation, many risks remain and the situation remains very fluid.
• China recently cut interest rates for the second time in a month, which likely indicates the conditions on the ground remain challenging.

Tags: Baker Hughes, Bank Of America, Computer Storage, Conagra, Conagra Foods, Consumer Staples, Earnings Reports, Earnings Season, Ebay, Gas Drilling, Google, Grain prices, Jpmorgan Chase, Low Expectations, Market Radar, Morgan Stanley, Packaged Goods Companies, Second Quarter Earnings, Second Quarter Sales, Street Expectations
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We Are All Alone

Thursday, July 19th, 2012

by John Nyaradi, Wall Street Sector Selector

Investors are on their own and cannot count on the Federal Reserve to save their portfolios.

Global markets seem to be pricing in a new round of quantitative easing from the Federal Reserve.  Dr. Bernanke and his colleagues will likely comply sometime between now and December.  However, even with more quantitative easing, investors can’t count on the Federal Reserve to rescue the stock market and their portfolios.  We are on our own, and here’s why:

1. Europe’s Debt Crisis

Europe is the crisis that just won’t quit, with Spain, Italy, Greece, ad nauseam , all running out of money. There is simply no solution to this problem as there is simply not enough money in Europe to save Italy and Spain. When the piper finally demands to be paid, no central bank on earth will have the firepower to stop the global financial avalanche that this crisis could trigger.

2. Earnings

Second-quarter earnings season is shaping up as a weak affair with downgrades coming from most every sector. As we all know, stock prices eventually are based on earnings, and no amount of monetary policy, low interest rates or quantitative easing can add profits to corporate bottom lines. Monetary policy can set the stage for, but cannot create, demand.

3. Global Recession

This item is part and parcel of Items #1 and #2. Recession is quickly spreading across Europe. China’s economy, while still growing briskly by developed world standards, is rapidly slowing. The United States limps along with a 1.9% growth rate and recent GDP estimates have been sharply revised downwards. Like antibiotics for a sick person, Dr. Bernanke and his Fed can help but the disease must run its course and the patient must have the physical strength to survive on his own.

4. Diminishing Returns of Quantitative Easing

Each round of quantitative easing has smaller impact and brings greater risks for the global economy. Last week’s interest rate cuts by the European Central Bank, the People’s Bank of China and more quantitative easing from the Bank of England were largely ignored by global markets which, in the “good old days,” would have rallied hard on this sort of same-day global intervention.  Like antibiotics fighting a virus, quantitative easing is losing its effect as the virus grows immune and mutates to offset continued attacks.

5. The Dreaded Fiscal Cliff

Dr. Bernanke has made it quite clear in recent testimony to Congress that the “fiscal cliff” coming up in December is too big for him to manage and that it needs to be resolved to avoid a significant economic shock. The hit to GDP from the fiscal cliff would likely trigger another recession in the United States (See Item #3)

ETF strategies for difficult days

So what are we supposed to do as we try to protect capital, prepare for retirement and secure our financial futures? Several options come to mind:

A. Cash: Cash is king, particularly in deflationary, depression-like environments. The U.S. dollar, represented by PowerShares DB Bullish Dollar ETF (NYSEARCA:UUP) is up some 5% since early May as capital seeks the perceived safety of the U.S. dollar. Cash doesn’t have to be U.S. dollars, either, as Swiss francs have been on a roll, along with the Japanese yen (NYSEARCA:FXY)

B. U.S. Treasury Bonds: Like the dollar, the U.S. is still seen as the safest harbor in an uncertain world and U.S. Treasuries are near record low yields and high prices as money flocks to the perceived safety of Uncle Sam. The biggest moves will probably come in the long end of the curve and iShares Barclays 20+ Year Treasury Bond ETF (NYSEARCA:TLT) is up some 14% since early April. iShares Barclays 7-10 Year ETF (NYSEARCA:IEF) has gained more than 5% in the same time frame. One day, the “short” bond trade will be the position of a lifetime, but that day does not look like today.

So now it’s summertime, but the living is not likely to be easy, at least for awhile. (apologies to George and Ira Gershwin, “Porgy and Bess”)   We can’t count on Dr. Bernanke and his Federal Reserve to save us from what lies ahead but we can use the power and versatility of exchange traded funds to navigate through these challenging times.  We are all alone.

Get Wall Street Sector Selector’s Free Stock Market Warning Indicator!

Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time. Wall Street Sector Selector holds a position in (TLT)

Copyright © Wall Street Sector Selector

Tags: Ad Nauseam, Bernanke, Bottom Lines, Debt Crisis, Diminishing Returns, Downgrades, Earnings Season, Enough Money, Firepower, Gdp Estimates, Global Economy, Global Markets, Global Recession, Interest Rate Cuts, Italy Greece, Low Interest Rates, Physical Strength, Second Quarter Earnings, Sick Person, Stock Prices
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Sovereign Risk Crunch: Asian Banks Commence Cutting Credit Lines To French Banks, Sparking Self-Fulfilling Prophecies

Thursday, August 11th, 2011

by ZeroHedge.com

Remember how we joked (but were dead serious) that the IMF is now simply a figurehead organization, and the real global bailout cop is China? Well, that may not be the case for much long. Reuters has just broken news that at least one bank in Asia, and five other in process, has cut credit lines to major French lenders “as worries about the exposure of French banks to peripheral euro zone debt mounts, banking sources told Reuters on Thursday.” Why is this worrying? Because as is by now well-known, the PBoC has been as aggressive a buyer in the primary market of European market as most European banks, which as is well-known immediately turn and pledge said debt as collateral to the ECB for 100 cents on the euro, and the fact that its proxies are now quietly withdrawing from the European market as lenders of last resort, is probably far worse news than a rumor that the S&P may cut France.

Reuters continues:

That sudden rise in risk perception, combined with sharp share price falls in French banks, prompted some banks in Asia to speed up reviews of counterparty risk and look at whether they should cut exposure to European lenders, sources at each of the six banks in Asia said. Contacted about the moves by the banks in Asia, a spokeswoman for top French lender BNP Paribas <BNPP.PA> in Paris said: “We never comment on market rumours.”

Societe Generale <SOGN.PA> had no immediate comment to make while a spokeswoman for Credit Agricole <CAGR.PA>, which will publish its second-quarter earnings later in August, said the bank would not make any comment.

The banks in Asia and the sources — a mix of risk officers, senior traders and loan bankers — could not be identified because of the sensitive nature of the information.

The head of treasury risk management for Asia at one bank in Singapore said their credit lines to large French banks had been cut because of the perceived risks in lending to these counterparties.

“We’ve cut. The limits have been removed from the system. They have to seek approval on a case-by-case basis,” the treasury risk official said. The bank official declined to name the French banks.

A senior credit trader in Singapore said that when a bank’s shares fall that sharply their risk officer will automatically look at how much exposure they have to that lender.

And more:

Banks’ heightened responses could exacerbate the market strains if they all acted simultaneously with portfolio-at-risk modelling, analysts said.

“The thing is if they all use it at the same time they will all sell at the same time when risk goes up, and that will drive prices down and it is like a snowball because then the prices go down and then your value-at-risk ratio will tell you ‘oh, I must reduce my risk even more’,” said Mark Matthews, head of research at Julius Baer.

Several of the traders and bankers in Asia said that while they had not cut all exposure to any particular institution, they were very cautious about taking on new trading positions with them.

A senior risk officer at a bank in Singapore said “obviously we are having a review”, when asked if they were reassessing their positions with European counterparties.

Bankers and risk officers at the five institutions in Asia that were still dealing with French banks said that while short-term lending of up to 30 days was still taking place, they were conducting a thorough review of longer-term credit lines regardless of the type of transaction.

“It’s all in relation to (our) take on a French bank’s credit risk, regardless of whether it’s a swap or interbank lending transaction,” said a senior loan banker at a Japanese bank.

What happens next is well known to anyone who lived through the fall of 2008: credit lines withdrawn means investors dumping stock in droves, means depositors staging physical money runs, means more credit lines withdrawn, means immediate liquidity crunch, means rumors of insolvency, means self-fulfilling prophecy, means scramble to get funding first from ECB, then from Fed, but by then contagion has spread and the entire financial system is in danger of imploding, means several trillion in FX swap lines activated to prevent a run on the dollar, which also happens to be the funding currency, means another scramble to bail out capitalism.

Granted this is a downside case assessment.

Copyright © ZeroHedge.com

Tags: Asian Banks, Bailout, Bnp Paribas, Bnpp, Cagr, China Well, CréDit Agricole, ECB, Euro Zone, European Banks, French Banks, Market Rumours, Pboc, Risk Perception, Second Quarter Earnings, Self Fulfilling Prophecies, Sensitive Nature, Societe Generale, Sovereign Risk, Treasury Risk Management
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Placing This Week’s Selloff Into Context

Sunday, August 7th, 2011

Placing This Week’s Selloff Into Context

By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors

Cascading negative news over the past couple of weeks have frightened investors and sent the S&P 500 Index below levels where we began the year. BCA Research says “The U.S. economy has stalled, the euro area debt crisis has intensified, and inflation problems continue to plague emerging market countries.” On Thursday, we lived through the worst market decline since December 2008.

How extreme were this week’s markets? The 7.2 percent decline for the S&P 500 represents nearly a three standard deviation move for the index. That means the move was nearly three times the average move in a given week, going back 10 years.

Though extreme, selloffs are common this time of year. According to the Stock Trader’s Almanac, August has been the second-worst month of the year for the Dow Jones and S&P 500 since the 1987 crash. The 7.2 percent decline for the S&P 500 was the worst week ever recorded during the month of August, beating out another dismal week for performance in 1974.

What does this mean? Many stocks can are now on “sale.”

We believe volatility can be your friend if you’re not overleveraged and take advantage of downdrafts. We often look to add to our top positions during down days, weeks or months.

In order to successfully navigate their portfolios through shifting markets like today’s markets, investors must understand the inherent volatility in commodities and international investments. I often coach investors to “anticipate before they participate.”

There are a few reasons to remain cautiously optimistic:

• Today’s job number was better than many expected
• Second-quarter earnings for S&P 500 companies are up over 17 percent on a year-over-year basis, according to BCA Research. This has been driven by a 13 percent rise in revenues for those companies.
• Current conditions are similar to 13 months ago when the S&P 500 was down 15 percent and prompted the Federal Reserve to initiate the QE2 program, BCA says. This means the door to QE3 has begun to swing open.

Being optimistic in today’s difficult market is certainly not traveling with the herd. Regardless of market conditions, those searching for reasons to be pessimistic will always poke holes in the optimistic viewpoint. This is a because “most people don’t want to risk looking dumb when it’s so easy to just go along with the herd’s view that the world is going to hell in a hand-basket,” writes Loretta Breuning, Ph.D. for Psychology Today. Breuning continues “Your brain scans for facts that fit the [your beliefs], and skims past facts that don’t fit.”

It’s also important to remember we must always view today’s market in a global context. The world has 7 billion people fueling the global economy. Today’s globalized world is quite different from the 1970s when many of the world’s 3 billion people were isolationists, non-participants in global commerce. Today, China and India are large contributors to the global economy. In these countries incomes are rising and consumption of goods and services is increasing.

Zachary Karabell did a great job of explaining this in a piece for The Daily Beast. In his piece, Karabell described this week’s selloff as “indiscriminate” and “programmatic.” Mainly, Karabell makes the case that focusing on the selloff ignores the shifting dynamics of global markets we’ve discussed for many years.

“So where does this sell-off leave us? The panoply above is vital—because it indicates that there is no cliff off of which the global economy is about to plunge, despite the blathering of pessimistic talking heads.”

“Yes, there is and will continue to be a risk of collapse; the events of 2008-2009 showed that we don’t have a safety net for our interconnectivity, and that is a real risk. But we do live in a much less levered world, and one in which there is a level of confidence, albeit new and untested, in the world beyond the reach of Wall Street and the capitals of Europe, to say nothing of the forgotten behemoth Japan.”

“Again, you’d be a fool to make a definitive market call for today or next week, but it’s hard to panic about a system that thrives where it used to lag and lags where it used to thrive. Those realities meet on the balance sheets of thousands of global companies who have been reporting just that for the past two years—booming abroad, treading water at home. This stock sell-off has little to do with profits, and everything to do with the relentless need for capital in Europe, plus an American investing class that is only slowly awakening to the fact that yes, this time it’s different.”

Karabell wrapped up his article with a piece of advice for investors

“This sell-off speaks to the continuing anxiety that a world not led by the United States and Europe and Japan is a world adrift. The smart money should bet that this swoon isn’t based on what we can see, but rather a fear of the unknown and the new. Welcome to the 21st century.”

What Karabell is pointing out is that the global fundamentals remain supportive of long-term growth.

This week was an outlier and extreme moves often present a buying opportunity. In a note yesterday, ISI Group’s John Mendelson framed this week’s selloff well: “There is nothing more bullish than fear nor more bearish than certainty.” Mendelson is saying that that if everyone is convinced the market is going higher, it may be a good time to sell. If everyone’s bailing out because of fear, it may be the time to buy.

Director of Research John Derrick contributed to this commentary.

Copyright © U.S. Global Investors

Tags: Chief Investment Officer, Commodities, Current Conditions, Debt Crisis, Dow Jones, Downdrafts, Emerging Market Countries, Frank Holmes, India, International Investments, Market Decline, Month Of August, Month Of The Year, Negative News, Second Quarter Earnings, Selloff, Selloffs, Standard Deviation, Stock Trader, Time Of Year, U S Global Investors, Volatility
Posted in Commodities, India, Markets | Comments Off

U.S. Equity Market Cheat Sheet (August 8, 2011)

Sunday, August 7th, 2011

U.S. Equity Market Cheat Sheet (August 8, 2011)

The domestic stock market suffered a sharp correction this week with the S&P 500 Index losing 7.19 percent. The figure below shows the performance of each sector in the index for the week. All ten sectors declined. The best-performing sector for the week was consumer staples which decreased 2.54 percent. Other top-three sectors were telecom services and utilities. Energy was the worst performer, down 9.98 percent. Other bottom-three performers were materials and financials.

Within the consumer staples sector the best-performing stock was Kraft Foods, which rose 1.43 percent. Other top-five performers were PepsiCo, Colgate-Palmolive, Hershey Co., and Dr Pepper Snapple Group.

Strengths

• With the stock market undergoing a sharp correction, it is normal for some of the groups in the consumer staples and utility sectors to outperform. That occurred this week as soft drinks, household products, integrated telecom services, packaged foods; tobacco and multi-utilities appeared among the top-ten groups. Those groups were down between 0.92 percent and 2.72 percent.
• The construction materials group outperformed, down 1.57 percent, led by its single member, Vulcan Materials. In the company’s second quarter earnings conference call this week, the CEO said that they were “encouraged by the broad-based improvement in pricing versus the prior year’s second quarter.”
• The gold group outperformed, losing 2.16 percent. This group consists of a single member, Newmont Mining Co. The price of gold increased during the week.

Weaknesses

• The price of crude oil declined this week, and three of the bottom-ten underperforming groups were energy-related. The coal & consumable fuels group declined 21 percent. The oil & gas drilling group fell 16 percent, and the oil & gas refining & marketing group gave up 16 percent.
• The industrial REITS (real estate investment trusts) group was the second-worst performer, down 19 percent, led by its single member, Prologis. Several REIT groups were among the weakest groups in the financials sector this week, perhaps due to investor concern over the possibility of an economic slow-down and its effects on real-estate values.
• The airlines group underperformed, down 15 percent by its single member, Southwest Airlines Co. The company reported quarterly earnings below the consensus this week, and the CEO said that, based on bookings for August and September, the rate of growth has slowed.

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

• 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: Colgate Palmolive, Construction Materials Group, Consumer Staples, Crude Oil, Domestic Stock Market, Dr Pepper, Gold Group, Household Products, Kraft Foods, Newmont Mining, Newmont Mining Co, Price Of Crude Oil, Price Of Gold, Quarter Earnings Conference, Real Estate Investment, Real Estate Investment Trusts, Second Quarter Earnings, Soft Drinks, Telecom Services, Utility Sectors, Vulcan Materials
Posted in Markets, Oil and Gas | Comments Off

U.S. Equity Market Cheat Sheet (August 2, 2011)

Monday, August 1st, 2011

U.S. Equity Market Cheat Sheet (August 2, 2011)

The figure below shows the performance of each sector in the S&P 500 Index for the week. All ten sectors declined. The best-performing sector for the week was utilities which decreased 2.13 percent. Other top-three sectors were consumer staples and technology. Industrials was the worst performer, down 6.01 percent. Other bottom-three performers were materials and energy.

Within the utility sector, the best-performing stock was Exelon which rose 0.85 percent. Other top-five performers were FirstEnergy, Public Service Enterprise, Constellation Energy, and PPL.

Strengths

• The healthcare technology group was the best-performing group for the week, up 2 percent, led by its single member, Cerner. The firm reported second-quarter earnings and revenue in excess of the analysts’ consensus estimates.
• The internet retail group outperformed, gaining 2 percent on strength in the stock of Amazon. and Expedia. Both companies reported quarterly earnings and revenues above the consensus estimates.
• Two energy-related groups were among the top-ten outperformers. Oil & gas refining & marketing and oil & gas storage & transportation finished in third and fourth place, respectively. The former gained a fraction of one percent, and the latter lost a fraction of one percent.

Weaknesses

• The healthcare facilities group was the worst-performing group, losing 11 percent on weakness in the stock of its single member, Tenet Healthcare. The weakness was probably related to earnings reports this week from two other hospital companies. HCA Holdings reported earnings and revenue below the consensus estimates. Health Management Associates beat the earnings consensus but revenue was below the consensus.
• The electrical components & equipment group fell 10 percent, led down by its largest member, Emerson Electric. In a regulatory filing the company warned that it had seen a definite weakening of general business activity in June and July, and while industrial-related businesses are still strong, the company expects eventual softening due to the generally poor economic environment.
• The tires & rubber group underperformed, down 10 percent, led by its single member, Goodyear Tire & Rubber. The company reported second-quarter earnings and revenue well in excess of the consensus estimates, but the stock sold off after the company warned of increasing raw material costs and uncertain economic conditions for the second half of the year.

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

• Failure to resolve the federal budget issue creates uncertainty, which is not helpful for markets.

Tags: Amazon, Busin, Company Warned That, Constellation Energy, Consumer Staples, Emerson Electric, Equipment Group, Exelon, Facilities Group, Firstenergy, Gas Storage, Health Management Associates, Healthcare Technology, Performing Group, Public Service Enterprise, Quarterly Earnings, Retail Group, Second Quarter Earnings, Tenet Healthcare, Utility Sector
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U.S. Equity Market Cheat Sheet (July 25, 2011)

Sunday, July 24th, 2011

U.S. Equity Market Cheat Sheet (July 25, 2011)

The figure below shows the performance of each sector in the S&P 500 Index for the week. Nine sectors increased and one sector declined. The best-performing sector for the week was technology which increased 3.66 percent. Other top-three sectors were energy and financials. Telecom was the worst performer, down 0.08 percent. Other bottom-three performers were industrials & materials.

Within the technology sector, the best-performing stock was Motorola Mobility Holdings which rose 16.52 percent. Other top-five performers were Sandisk, Apple, Cisco Systems, and Tellabs.

Strengths

• The human resources & employment services group was the best-performing group for the week, up 16 percent, led by its single member, Robert Half International. The firm reported second quarter earnings and revenue greater than the analysts’ consensus estimates.
• The motorcycle manufacturers group was the second-best performer, rising 10 percent. The group’s single member Harley-Davidson reported quarterly earnings and revenue above the consensus estimates.
• The healthcare services group outperformed, gaining 9 percent. Express Scripts made an offer to acquire Medco Health Solutions. Both pharmacy benefit management firms are members of the healthcare services group, and both stocks rose following the offer.

Weaknesses

• The office services & supplies group was the worst-performing group, down 5 percent. Group member Avery Dennison provided revenue and earnings guidance for the second quarter and full year, all of which were below the analysts’ consensus estimates.
• The household appliances group was the second-worst-performing group, losing 4 percent on weakness in the stock of its single member, Whirlpool. The large appliance maker reported quarterly earnings and revenue below the consensus estimates.
• The airlines group underperformed, falling by 3 percent on weakness in the stock of its single member, Southwest Airlines. The weakness in the airline group appeared to be related to investor concern over higher fuel prices.

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

• Failure to resolve the federal budget issue creates uncertainty, which is not helpful for markets.

Tags: Appliance Maker, Avery Dennison, Cheat Sheet, Cisco Systems, Express Scripts, Group Member, Harley Davidson, Healthcare Services Group, Household Appliances, Management Firms, Manufacturers Group, Medco Health, Medco Health Solutions, Motorcycle Manufacturers, Performing Group, Pharmacy Benefit Management, Quarterly Earnings, Robert Half International, Second Quarter Earnings, Tellabs
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U.S. Equity Market Cheat Sheet (July 11, 2011)

Monday, July 11th, 2011

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

The figure below shows the performance of each sector in the S&P 500 Index for the week. Five sectors gained and five declined. The best-performing sector for the week was technology which increased 1.59 percent. Other top-three sectors were materials and energy. Telecom services was the worst performer, down 1.27 percent. Other bottom-three performers were financials and healthcare.

Within the technology sector, the best-performing stock was Western Digital, which rose 5.13 percent. Other top-five performers were Salesforce.com, Apple, Accenture, and Autodesk.

Strengths

• The casinos & gaming group was the best-performing group, gaining 6 percent. Wynn Resorts advanced after the Macau government reported that Macau casino gaming revenue for June increased 52.4 percent year-over-year.
• The general merchandise stores group outperformed, up 5 percent, driven by its largest member, Target. The retailer reported June same-store-sales increased 4.5 percent year-over-year, above the consensus estimate of 3.2 percent.
• The internet retail group gained 5 percent. Netflix increased after announcing plans to enter the markets in Latin America and the Caribbean later this year. Priceline.com and Amazon.com also contributed to the group’s gain.

Weaknesses

• The building products group was the worst performer, down 4 percent on weakness in its single member, Masco. Masco’s revenue is highly dependent on the U.S. housing industry which has been weak.
• The construction materials group lost 4 percent on weakness in its single member, Vulcan Materials. The weakness might be related to investor concern over public (federal and state) spending which accounted for approximately 55 percent of Vulcan’s end demand in 2010.
• The investment banking & brokerage group underperformed, losing 4 percent. Goldman Sachs and Morgan Stanley both sold off for the week. A brokerage firm lowered second quarter earnings estimates for both companies, and another brokerage firm lowered its second quarter earnings estimate for Goldman.

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

• The end of quantitative easing on June 30 might result in a weaker economy.

Tags: Amazon, Brokerage Firm, Brokerage Group, Consensus Estimate, Construction Materials Group, Gaming Group, Gaming Revenue, Goldman Sachs, Investor Concern, Macau Government, Masco, Morgan Stanley, Netflix, Performing Group, Retail Group, Second Quarter Earnings, Target, Telecom Services, Vulcan Materials, Wynn Resorts
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U.S. Equity Market Cheat Sheet (June 20, 2011)

Saturday, June 18th, 2011

U.S. Equity Market Cheat Sheet (June 20, 2011)

The figure below shows the performance of each sector in the S&P 500 Index for the week. Seven sectors gained and three declined. The best-performing sector for the week was consumer staples which increased 1.20 percent. Other top-three sectors were industrials and utilities. Materials was the worst performer, down 1.96 percent. Other bottom-three performers were energy and technology.

Within the consumer staples sector, the best-performing stock was Lorillard, which rose 11.51 percent. Other top-five performers were Tyson Foods, Walgreen, Colgate-Palmolive, and Brown-Forman.

Strengths

• The healthcare facilities group was the best-performing group for the week, up 8 percent, led by its single member, Tenet Healthcare.
• The retail computer & electronics group outperformed, rising 6 percent on strength in member Best Buy. The retailer reported first quarter earnings and revenue above the consensus estimates.
• The apparel & accessory group outperformed, up 4 percent. Group member VF Corp. agreed to buy Timberland for about $2 billion in cash in an effort to add scale to its outdoor clothing offerings.

Weaknesses

• The metal & glass containers group was the worst performer, losing 6 percent, led down by member Owens-Illinois. The manufacturer of glass containers announced that it expects second quarter earnings to be lower than originally forecast because of disappointing demand and supply chain problems.
• The fertilizer & agricultural chemicals group fell 6 percent with both group members (Monsanto and CF Industries Holdings) declining. The Senate voted for ending the ethanol subsidy. The vote was to amend an economic development bill which may not pass.
• The coal & consumable fuel group underperformed, down 5 percent. All three members of the group sold off with the weakness probably related to the decline in the price of crude oil during the week.

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

• 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 uncertainty, which is not good for stock prices.

Tags: Accessory Group, Agricultural Chemicals, Best Buy, Cf Industries, Cf Industries Holdings, Chemicals Group, Colgate Palmolive, Consumer Staples, Crude Oil, Ethanol Subsidy, Facilities Group, Fuel Group, Glass Containers, Owens Illinois, Performing Group, Price Of Crude Oil, Retail Computer, Second Quarter Earnings, Tenet Healthcare, Tyson Foods, Vf Corp
Posted in Markets, Oil and Gas | Comments Off

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
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