U.S. Equity Market Radar (May 7, 2012)

U.S. Equity Mar­ket Radar (May 7, 2012)
The S&P 500 Index declined 2.44 per­cent this week. Telecom­mu­ni­ca­tion ser­vices and util­i­ties out­per­formed as investors sought higher div­i­dend yields in the wake of higher mar­ket volatil­ity.  The S&P 500 suf­fered its worst weekly decline since Decem­ber as the mar­ket digested a slew of eco­nomic releases, which on aver­age came in slightly below expectations.

Strengths

• AT&T and Ver­i­zon led the telecom­mu­ni­ca­tion ser­vice sec­tor for a sec­ond week, as investors sought the rel­a­tive safety of mar­ket lead­ing div­i­dend yields.
• Util­i­ties also per­formed well dur­ing this “risk off’ week, par­tic­u­larly as the 10-year U.S. Trea­sury yield sank to just 1.88 percent.
• The defen­sive con­sumer sta­ples sec­tor out­per­formed the broader mar­ket with rel­a­tively small decline of 0.52 per­cent.  Whole Foods Mar­ket and Archer-Daniels gained 7.8 per­cent and 3.8 per­cent, respec­tively, dur­ing a chal­leng­ing trad­ing week.

Weak­nesses

• Notably, infor­ma­tion tech­nol­ogy trailed the S&P 500 Index this week by 131 basis points, and was the worst-performing sec­tor within the broad mar­ket. Accord­ingly, Apple declined by 6.3 per­cent over the last five days.
• Energy and Mate­ri­als lagged the mar­ket as the price of crude oil dropped below $100 a bar­rel and the Thomp­son Reuters/Jefferies Com­mod­ity Index fell by 2.7 per­cent this week on soft employ­ment data and eco­nomic growth con­cerns.  Dia­mond Off­shore Drilling fell 4.6 per­cent dur­ing the week.

Oppor­tu­nity

• Despite down­side volatil­ity dur­ing the week, the home­build­ing sub­sec­tor con­tin­ues to per­form well, hit­ting a new 52-week high, and fin­ish­ing the week rel­a­tively flat in a down market.

Threat

• The U.S. remains a bright spot in the global econ­omy and exter­nal shocks from Europe or Asia can’t be ruled out.