Stock Sectors:Putting A Wrap on the First Quarter 2007
By Bryan Bottarelli
A Taipan Financial News Market Report (Sign up Free!)
--------------------------------------------
In this article
The first calendar fiscal quarter has ended and the market is receiving some extremely mixed signals.
A new Fed chief has helped persuade some of the biggest one-day gainers on the market… as well one of the market’s biggest single-day losers.
Over the first quarter, the steel and the materials sectors shined, while construction and oil didn’t do quite as well.
--------------------------------------------
Sector Watch: Putting a Wrap on Q1 2007
It’s hard to believe that the first quarter of 2007 is about to come to an end.
As we look ahead to the second quarter, we currently have a market (and a Fed, for that matter) that is giving off an increasing number of mixed signals. Just today, for example, it was reported that consumer sentiment slid in March to its lowest level in six months, as the final March reading fell to 88.4 from 91.3 in February, the lowest level since September of 2006.
The reason for the fall was the combination of rising gasoline prices (noted by Adam yesterday) and slowing income gains. But if you look back at last week -- you’ll see that the market posted five straight days of gains -- buoyed by the Fed’s insistence that the market is in that all-important “comfort zone.”
What we’re really dealing with is a difficult transition from one Fed chief to another. For example, Mr. Greenspan (a worrywart by nature) gave off plenty of warning signs in his testimony -- and more importantly favored taking action. On the flipside, Mr. Bernanke tends to smooth over the current state of the economy and (for better or worse) takes on a less actionable stance when it comes to his policy moves.
In the first quarter of 2007, this has led to some of the market’s biggest one-day gainers. But it has also witnessed one of the market’s biggest single-day losses as well. So as we head into the second quarter, I would expect more intraday volatility. And I would also expect near-term oil prices to fall as the Iran/U.K. standoff is eventually resolved.
In terms of specific market sectors, it’s important to look back and see which sector groups did the best (and the worst) in the first quarter.
-----------------------------------------
Enjoying this article? Get Market Report everyday! Sign up Free!
-----------------------------------------
Sector Watch: The Best and Worst Stock Sector Performances
On the plus side, the best gains were tallied by Market Vectors Steel (SLX), which posted a 12.63% gain. Coming in second was PowerShares Basic Materials (PRFM) that posted a 10.54% gain. Playing the strongest materials stocks to the upside is how Adam and I made tremendous gains for our WOW readers.
I find steel performance especially interesting today thanks to two new steel upgrades from UBS. The firm upgraded Steel Dynamics (STLD:NASDAQ) from “neutral” to “buy” -- and the stock has gained $1.35 (or 3.16%) on the news.
At the same time, UBS also upgraded U.S. Steel (X:NYSE) from “reduce” to “neutral” -- and yet the stock is down $1.28 (or 1.3%) on the news. I find it interesting that two upgrades from the same firm on the best-performing three-month sector have each resulted in different trading patterns today.
Looking at the three-month laggard sectors, the iShares on the Dow Jones US Home Construction (ITB) make up this dubious spot with a loss of 7.38%. This is not surprising given the fallout in the top homebuilder stocks.
What is surprising is the performance of the Oil Services HOLDRs (OIH:AMEX). As of February 28, this collective group was showing a 6.94% loss on the year. But then the Iran/U.K. standoff got started, and the entire oil sector shot aggressively higher. In one short month, the OIH turned a 6.9% quarterly loss into a 5.9% quarterly gain.
This was quite a one-month swing fueled by an added “war premium” that’s currently being priced into oil. And that’s the important issue. If this standoff gets resolved over the weekend, you could see an extended oil sector sell off in the coming weeks as oil prices revert back to their norm.
And tactically speaking, this coming selling pressure may just set the table for another round of upside calls into the summer driving season.
***
Bryan Bottarelli is the head trading tactician for the WaveStrength Group, and is a contributing editor for Taipan Financial News. Coming off the floor of the Chicago Board Options Exchange (CBOE), Bryan uses WaveStrength chart forecasting to develop wining options plays for his service called WaveStrength Options Weekly. Bryan is also the lead editor of BottarelliResearch, an elite membership service that he independently publishes himself.
-------------------------------------------------
Did you like this article? Get Market Report everyday! Sign up Free!
--------------------------------------------------
Related Articles
Sector Watch: Crude oil prices shot up to their highest levels of 2007.
Sector Watch: Think the healthcare sector is strong?
Sector Watch: All it takes is one announcement.
Related Resources
Sector Watch: The top 3-month ETF performers.
Sector Watch: The 3-month OIH Chart.