Markets Drop as Japan's Problems Grow

by: David Brown

By David Brown

Against the backdrop of the enormous tragedy in Japan, any words I might write about the market seem inconsequential, and to attempt to project the consequences of that country’s devastation upon the world’s economy would be folly. Let me just say that our hearts go out to everyone in Japan.

As for last week, it will come as no surprise that both fear indicators — the short-term VIX and the longer-term VXX – were up for the week, though not as sharply as one might have expected. Even before the tragic events in Japan, the markets were trying to deal with the unrest in the Middle East, and not surprisingly, our domestic markets were down across the board for the week. The greenback has fallen the last three days, which may have softened the blow a little for domestic markets.

Monday, the three major indices were down about half a percent, with the S&P 500 (NYSEARCA:SPY) down the most, at -0.6%.

Market Stats. In a classic flight to safety, Large-cap Value did the best among the cap/styles, losing less than one percent (-0.75%), while Small-cap Growth performed the worst, with a loss of -3%.

The best-performing sectors reflected the flight to safety, with one big surprise. With small losses, Utilities (down -0.2%) and Consumer Non-durables (down -0.37%) were the second and third best performers of the week. The surprise was Transportation, the only positive sector, with a gain of +1.05%.

The week before, Transportation was among the laggards, responding to skyrocketing oil prices. So last week, when oil prices fell nearly 5% due to the assurances from OPEC nations to keep oil flowing, Transportation rebounded dramatically to become the top-performing sector of the week.

Click here to see the market stats.

The other end of the spectrum also reflected the classic flight to safety, with Basic Industries (-4.68%) performing the worst, and Energy (-4.2%) and Consumer Durables (-3.36%) only slightly better.

As for our sector outlook, I would put little faith in this week’s SectorCast rankings since they were based on data gathered prior to the earthquake and tsunami in Japan.

4 Stock Ideas for This Market

In any market some stocks will move up. The four below are our best guess as to which ones this struggling market may like this week. I started with the preset High Growth search in MyStockFinder. I then up-weighted Technicals and Insider Buying. Each of these four stock ideas is rated a Strong Buy by Sabrient and is either breaking out technically or trying to bounce from support.

Horsehead Holding Corp (ZINC) – Basic Materials
Sauer-Danfoss (NYSE:SHS) – Capital Goods
Teradyne, Inc. (NYSE:TER) – Technology
Dawson Geophysical (NASDAQ:DWSN) – Energy

Full disclosure: The author does not personally hold any of the stocks mentioned in this week’s “Stock Ideas.”

Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.