|
Today's Market WrapUp 07.25.2007 Mon Tue Wed Thu Fri Panzner Archive Looking
Below the Surface Although the S&P 500 index is up 7.04% for the year, consumer-related shares have not kept pace. The consumer discretionary sector, for instance, has gained just 1.07% since the end of December, a difference of more than 600 basis points. Given the meltdowns in housing and the subprime finance sector, this is not all that surprising. However, the consumer staples sector has also lagged the broad market. It is up 4.55% for the year, a performance gap of more than one-and-a-half percentage points. Despite reassurances to the contrary, it would seem that investors are anticipating an across-the-board slowdown in consumer spending.
Financial shares remain in the doghouse. Indeed, the sector has recently fallen beneath key support relative to the S&P 500 index, and seems poised to give back some or all of the relative performance gains seen since the stock market bubble peak back in 2000. With large institutional investors still quite overweight the sector, and recent credit market developments indicating that financing costs are poised to rise as fees from deal-making and securitization activities fall, the fundamental picture seems bearishly in synch with the negative technical pattern.
One asset class that has outperformed the broad market for almost a decade is comprised of small cap shares. However, this group has begun to languish over the past few months. Recently, the benchmark Russell 2000 index broke down below key short and long-term support levels relative to the S&P 500 index. Interestingly, this transition has come about at a time when the stock market has not seen widespread participation by small investors. Is it possible that the two developments are related?
Finally, one argument that equity bulls have used to justify their continued optimism is high levels of pessimism among the investment crowd. Yet the latest Commitments of Traders report from the Commodity Futures Trading Commission indicates that hedge funds and commodity trading advisors as a group have recently become net long the Nasdaq 100 futures for the first time in five months. While that doesn’t preclude the technology-heavy market from rallying further, the history of this particular indicator suggests that the risk is more likely to be on the downside than the upside.
TODAY’S MARKETDespite much better than expected results from Amazon.com and an improved outlook from Boeing, stocks ended below the day’s best levels following a strong start amid nervousness over weak housing data and fears that financing for buyouts is drying up. Sharply higher oil prices in the wake of bullish inventory data from the Department of Energy also weighed on sentiment, though energy shares performed strongly. Light sweet crude futures for September finished up $2.76 per bbl, or 3.75%. At the close, the Dow Jones Industrials Average was up 68.12 points (0.50%) to 13,785.07. The S&P 500 index rose 7.05 (0.47%) to 1518.19, and the Nasdaq Composite Index gained 8.31 (0.31%) to 2648.17. Among the reports unsettling investors was news that Chrysler Group had abandoned plans to sell $12 billion in debt in the face of strong investor resistance and word that the banks involved in Kohlberg Kravis Roberts’ acquisition of the U.K.’s Alliance Boots failed to find buyers for $10 billion in loans. A report from the National Association of Realtors that home resales fell by a worse-than-expected 3.8% in June seemed to buttress comments from Countrywide Financial CEO Angelo Mozilo yesterday that home prices were falling “almost like never before, with the exception of the Great Depression.” Yields on Treasury bonds drifted slightly lower and gold succumbed to profit-taking, with the December futures contract losing $11.20 to close at $686.50. Michael Panzner Copyright © 2007 All rights reserved. CONTACT
INFORMATION |
