Weekly Sector Review: July 6, 2012

by: Alex Gurvich

The market, as measured by the S&P 500 Index, posted a negative return of 0.55% return for the week, trading at an annualized 11.1% volatility, based on four trading days.

The weekly sector performances, as measured by the S&P 500 sector indices were:

Sector Index Weekly Return Return over S&P
Staples CST.I 0.54% 1.09%
Discretionary CDI.I 0.10% 0.65%
Telecom TEL.I -0.20% 0.35%
Energy ENE.I -0.35% 0.20%
Materials MAT.I -0.39% 0.16%
Utilities UTL.I -0.44% 0.10%
Technology TEC.I -0.49% 0.06%
Healthcare HEA.I -1.06% -0.51%
Financials FIN.I -1.24% -0.69%
Industrials IND.I -1.39% -0.84%
S&P 500 S&P -0.55% 0.00%
From June 29, 2012 to July 6, 2012

A very different and uncertain week indeed, especially relative to the previous week's Friday euphoria of 2.5 percent gain for the market.

All defensive sectors (except Healthcare) have performed well, outperforming the S&P 500. They are Staples, Telecom and Utilities sectors. The Discretionary sector held up as well. The Energy sector, despite a drop in oil prices, has outperformed the market due continued uncertain geopolitical situation. The Materials sector had outperformed, as we have seen the rise in home sales.

On the negative side, the Healthcare sector seems to be absorbing the implications of the Patient Protection and Affordable Care Act and all the costs associated with it. The Financials sector is having a hangover, getting over the previous week's uncertain resolution of the European economic downturn. The Industrials sectors is being effected by the 3.8% drop in manufacturing.

The fundamental and macro pictures have provided mixed signals for the week, the US economy is showing some signs of recovery as seen by rise in the home sales, but the manufacturing is down and the employment numbers were below expectations.

The second quarter earnings season is almost upon us and we expect weak overall results that, unless already priced in the summer market, may potentially apply additional downward pressure on the returns.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: At the time of writing Rockledge had long and short positions in SPY, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY