Last week, the S&P 500 (^GSPC -0.22%) continued to lead the overall stock market higher, with gains of almost 19 points for the week and setting new record closing highs on Tuesday, Thursday, and Friday. Even though the Russian-Ukrainian crisis hit the market hard on Monday, subsequent assurances that the conflict won't balloon out of control made investors more confident, and upbeat figures on the U.S. employment front helped send stocks higher during the rest of the week. Valero Energy (VLO -2.86%) topped the list of gainers in the S&P 500 (^GSPC), while Lorillard (LO.DL) soared on potential takeover news. Genworth Financial (GNW 1.55%) and TripAdvisor (TRIP -0.59%) also made the list of the top four performers in the S&P last week.
Valero's (VLO) gains of more than 10% last week made it the top-returning stock of the week among the S&P 500, and it came amid strong stock performance in the refining industry generally. Since mid-January, spreads between West Texas Intermediate and Brent crude prices had been on the decline, potentially hurting the competitive advantage that Valero and its U.S. refining peers have from access to cheaper domestic crude. But gasoline prices have risen recently, and if that trend continues without a corresponding jump in crude oil prices, it will make Valero and its peers more profitable. Investors have clearly bought into that bullish case despite some of the longer-term challenges that refineries face.
Genworth (GNW) gained 9% as evidence grew that the recent scare about the U.S. economy's health could be short-term in nature. After having lost substantial amounts of money during the financial crisis because of its mortgage-insurance exposure, Genworth has benefited greatly from the recovery in the housing market. Although some investors were worried about news indicating slower housing-start activity and weaker sales of homes, better-than-expected jobs figures announced Friday have raised hopes that the coming spring will bring an end to the economy's winter malaise. If that happens, it should support Genworth's business even more.
For Lorillard (LO), its stock's 8% jump came largely from the idea that it would merge with rival Reynolds American to form a combined business that would pose a much bigger threat to industry leader Altria. The combination of the No. 2 and No. 3 tobacco companies in the U.S. would be difficult to envisage from an antitrust standpoint. But as Lorillard has been a first-mover in the e-cigarette revolution, it's entirely possible that Reynolds would want to grab up its peer just to move forward more aggressively on that front.
Finally, TripAdvisor (TRIP) gained almost 8%, as shareholders speculated that the long winter would lead to an upsurge in spring and summer travel that in turn would raise demand for TripAdvisor's travel-research services. With its combination of growth in hotel shopping and click-based revenue, TripAdvisor offers two solid streams of revenue. The question is whether the company's fundamentals can keep up with its rich valuation, but for now, investors are buying first and asking questions later.
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As the S&P 500 (^GSPC) has soared, it pays to watch the stocks that are leading the way. That way, you can better understand the advance and the forces behind it.
