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Domestic Equity Markets ~ 2nd Quarter 2010
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- The Dow Jones Industrial Average crossed over the psychologically important 11000 level in April and peaked at 11205 on April 26th. The level is important because we have not seen that height since before the collapse of Lehman Brothers. The decline of May and June brought the index down to a quarter ending low of 9774, a peak to trough drop of 13%. The S&P 500 had a peak to trough decline of 15.4%. The 15% decline is significant as many market watchers view that as Bear Market signal.
- The sell off was indiscriminate as every style and every sector (9 equity styles, each with 10 sectors) was in negative territory for the quarter. As a result of the decline, all styles were negative for the year to date period, as all of the first quarter gains have been ceded back to the market.
- Small Caps outperformed Large and Mid Caps for the quarter, as they also did in the first quarter. On a style basis, Small Growth was the “best” performing style with a decline of 9.2%. Large Growth was the worst performing style with a decline of 11.8%.
- Basic Materials are not a large component of the indices, but they sold off the most as investors grew concerned that the global recovery would stall and demand would fall. Utilities were the best performing sector within Large, Mid and Small Caps as investors became more defensive in the quarter.
- Two energy related disasters reminded us of the costs associated with our energy demands. Twenty nine miners died in early April at the Upper Big Branch mine in Comfort, WV. The mine operator, Massey Energy, lost half its value in the quarter. Later in April, 11 oil workers died on the Deepwater Horizons rig off the coast of Louisiana. The stocks of companies involved lost a quarter to half of their value since the blast, including; British Petroleum (-53%), Transocean (-50%) and Haliburton (-26%).
- Goldman Sachs was named in an SEC investigation over improper disclosures in a mortgage derivative they sold to institutional investors. The stock dropped 13% on the news in mid April and another 10% after a Senate hearing that left everyone a bit uneasy. In all, they were down 28% for the quarter.
- Apple once again proved that it could tempt consumers into buying something they did not know they needed and replace something that did not need replacement. The successful launch of the iPad and the 4G iPhone helped the stock gain 7% in a down sector within a down market.
- As if the markets were not jittery enough over the past 30 months, there was a flash-crash of nearly 1000 Dow points in early May. In an extreme case, shares of Accenture dropped from $42 to $2 in a matter of 15 minutes. The NYSE, NASDAQ and SEC have yet to explain why this occurred .
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