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SECTOR WATCH: First Half Winners and Losers
By Frederic Ruffy, Optionetics.com
6/23/2004 8:00:00 AM

http://www.optionetics.com/articles/article_full.asp?idNo=10602

With just one week remaining in the second quarter, it's time to tally up the halftime winners and losers on Wall Street. Overall, it has been a relatively uneventful six months with a lot of mixed trading. As a result, the major averages have made little progress one way or another. In fact, while the Dow Jones Industrial Average ($INDU) is down only .3%, the Nasdaq Composite Index ($COMPQ) has fallen approximately 10 points, or less than .5%.

Just as it was in the first half of 2003, the CBOE Internet Index ($INX) is the market’s best percentage gainer. However, the advance has been relatively small in 2004. During the first six months of 2003, the Internet Index skyrocketed 54.3%. It is up a more modest 14.3% so far this year. Nonetheless, as we can see from the table below, the Internet Index’s advance during the first six months of 2004 has earned it a spot on the top of the winners list. The index has been helped higher by solid performances from Checkpoint Software (CHKP), Infospace (INSP), and Yahoo (YHOO).

Energy stocks have also performed well. Both the PHLX Oil Service Index ($OSX) and the AMEX Oil Index ($XOI) are among the best percentage gainers. These stocks have been reacting to the ongoing strength in crude oil prices. During the first six months of this year, crude is up from $25.00 a barrel to its current levels near $38.00. The AMEX Natural Gas Index ($XNG) has also performed well. Companies in the sector are responding to a recent uptick in gas prices. During the past five months, natural gas futures have risen from roughly $5.00 per million BTU to a recent high near $6.70.

Outside of Internet and energy stocks, other areas of strength include retailers, telecomm, consumer product, commodity-related, and defense stocks. MidCap stocks have outperformed large and small caps. The S&P MidCap Index ($MID) is up 3%, compared to a 2.2% gain in the large cap S&P 500 ($SPX) and a 1.1% gain in the small cap Russell 2000 Index ($RUT). Also, the CBOE Ten-Year Rate Index ($TNX) is near the top of the winner’s list, which means that rates have been rising and bond prices have been falling.





Performance


Symbol
Dec. 31, 2003 – June 22, 2004

CBOE Internet Index
INX
14.34%

AMEX Oil Index
XOI
12.99%

PHLX Oil Service Index
OSX
10.59%

CBOE Ten-Year Rate Index
TNX
9.93%

AMEX Natural Gas Index
XNG
9.40%

S&P Retail Index
RLX
6.70%

NA Telecomm Index
XTC
5.86%

AMEX Consumer Product Index
CMR
5.60%

MS Commodity Related Index
CRX
5.32%

AMEX Defense Index
DFX
5.16%

DJ Utility Average
DUX
3.85%

S&P MidCap Index
MID
2.96%

S&P 500 Index
SPX
2.23%

MS Cyclical Index
CYC
1.93%

DJ Transports
DTX
1.85%

Russell 2000 Small Cap Index
RUT
1.14%

AMEX Biotech Index
BTK
0.44%

Nasdaq 100 QQQ
QQQ
0.33%

DJ Industrial Average
DJX
-0.29%

PHLX Bank Index
BKX
-0.40%

AMEX Pharmaceutical Index
DRG
-1.24%

AMEX Networking Index
NWX
-2.46%

GSTI Computer Software Index
GSO
-3.26%

Dogs of the Dow Index
MUT
-3.35%

AMEX Broker/Dealer Index
XBD
-5.91%

PHLX Semiconductor Index
SOX
-8.51%

AMEX Airline Index
XAL
-12.23%

PHLX Gold Mining Index
XAU
-21.27%


Several groups have showed relatively little movement so far this year. For instance, bank stocks are little changed during the past six months. The PHLX Bank Sector Index ($BKX) is down less than .5%. The AMEX Pharmaceutical Index ($DRG) has fallen 1.25%. Furthermore, since the banks and drug stocks account for a large percentage of the Dow and other market averages, their lack of movement this year helps to explain the market’s relatively lackluster performance.

While bank stocks have performed well, brokerage stocks have not. The AMEX Broker/Dealer Index ($XBD) is among the largest percentage decliners after falling 5.9%. Some areas of technology, including software, semiconductors, and networking stocks have also been lagging the market. Airline stocks have been losing altitude. The AMEX Airline Index ($XAL) is down 12.2% and is the market’s second worst performer.

The PHLX Gold and Silver Mining Index ($XAU) is the biggest percentage loser so far in 2004. During the first six months, the index has stumbled 21.25%. The XAU has been following the price of gold lower. Since December 31, the precious metal is down from more than $415.00 a troy ounce roughly $395.00. Consequently, shares of gold mining companies are falling and Anglogold (AU), Goldcorp (GG), and Gold Fields Ltd. (GFI) are among the first half’s worst performers.


Frederic Ruffy
Senior Writer & Index Strategist
Optionetics.com ~ Your Options Education Site
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