MARKET SNAPSHOT: Heady July Stock Gains Turn Focus On Laggards

A rally in stocks that pushed the Dow industrials to its best monthly gain since 2002 has prompted investors to focus on sectors that came late to the party.

Energy, July's third-worst performing of the ten industry groups that make up the S&P 500, is one group ready to recoup some of those lost hours of fun, they say.

"We're focusing very closely on energy investment," said Bill Greiner, chief investment officer of Kansas City-based Scout Investment Advisers, which manages $6 billion. His team is forecasting oil could rise to $75 or $80 a barrel by the end of 2009, which could set energy companies up for easy year-over-year comparisons in the fourth quarter.

"We think we'll see pretty good numbers come out of the oil patch between now and year-end," he said.

July fire-works

July started out under a cloud of worries that the rally that started back in March had gone "too far, too fast". It has turned out to be a break-out month for stock investors, thanks largely to corporate results that deteriorated a little less sharply than analysts expected.

The Dow Jones Industrial Average (DJI) finished its best month since October 2002 with an 8.6% gain and posted its best July - usually a tepid month for the market, as many traders take vacation - since 1989.

The S&P 500 also finished the month with historic gains. The index of large- cap stocks gained 7.4%, its best July finish since 1997. From its March 9 closing low, it's up 46%, according to Standard & Poor's.

And the broader Wilshire 5000 index notched its best July gain in its 39-year history, with a 7.8% gain.

Among industry groups, the spoils have gone to cyclical stocks. Materials outperformed the S&P 500's July advance with a gain of 13%. Consumer discretionary, a sector that includes retailers, was the second-best performer with a 9.4% gain. Industrials gained 9.2%.Gains in materials and other-resource intensive stocks are typical of a market whose economy is exiting a recession, says Greiner. The surprise is that energy companies didn't join other resource- dependent stocks beating the broader market. link.....