Friday, August 13, 2010

US Equity Sectors Wrap Up--HMOs slumped nearly 4% due to fresh concerns on the regulatory front;the Fannie/Freddie refinance speculation (which could harm the value of bank’s MBS holdings

US Equity Sectors – stocks slumped across the board this week, w/a lot of major groups tracking inline or worse than the SP500’s 3%+ decline.  There was only one sub-group that looks like it eked out a gain – SP500 Telecoms were up ~0.6% and continue to outperform (the group is up >2% for the month of Aug and has seen buyers since coming away from earnings in mid/late Jul; telcos in Europe have also been very strong).  Other “safety” groups also outperformed this week – health care, staples, and utilities all fell less than 1% (utilities helped both by their defensive nature and the M&A activity that took place on Fri).  While health care in aggregate fell less than 2%, HMOs slumped nearly 4% due to fresh concerns on the regulatory front (a bunch of Congressmen this week wrote a letter to the NAIC urging them to not permit HMOs to subtract Federal tax expense from the denominator of their MCR calculations).  Note that the NAIC wraps up this coming week (Obama is due to speak at the conclusion of the NAIC on Tues).  Within the staples, GIS traded up a few % this week (MCK, K, HNZ were all outperformers although EL dipped 9% coming away from earnings).  On the downside, tech was the weakest acting major group in the US markets, falling 5% (while the semis/SOX dropped >7%).  The tech hardware stocks slumped 7% (nearly as bad as the semis).  Tech was delivered a double whammy of negative news this week w/a slew of cautious sell-side PC remarks on Tues and the disappointing CSCO report/guidance on Wed.  PC stocks were hit across the whole supply chain (HPQ was also grappling w/its mgmt turmoil problems) and on Thurs/Fri communications-related chips/equipment came for sale.  The desk saw some covering in tech given how quickly and deeply the space sold off, but there wasn’t a lot of vanilla interest to accumulate on the weakness.  Keep in mind that we are coming up on a big week for tech earnings (there are a bunch of Jul-end earnings releases, inc. ADI on Tues, AMAT on Wed, and DELL/HPQ/MRVL on Thurs).  Away from tech, financials also lagged the broader market this week, weighed down by the banks (BKX fell 4.6% this week).  In addition to the general economic negativity (which is causing people to fear a stalling out of the recent credit improvement), there were a few financial specific events that hit the banks: 1) the Fannie/Freddie refinance speculation (which could harm the value of bank’s MBS holdings); 2) the flattening in the yield curve (the 2-10 spread fell ~16bp on the week); 3) reports of job cuts at some investment banks (a Bloomberg article this week discussed how Barclays and CSFB, among others, are starting to trim back on headcount b/c of slow activity levels).  The industrials dropped ~4.6% w/selling pressure much across the board (transports, machinery, etc) as the most cyclical stocks came for sale amid concern about the economic outlook

No comments:

Post a Comment