BOSTON (TheStreet) -- Stocks have been on a remarkable ascent since the "world is ending" bottom in March 2009. (The S&P 500 Index is up about 80%.)Investors have become more optimistic and willing to assume higher risk. However, many are still waiting for signs of economic stability, what with elevated unemployment, the down-and-out housing market and woes in Europe and Japan. Today's news that Standard & Poor's put U.S. sovereign debt's AAA rating, the highest, on a "negative" outlook is hammering stocks, with the S&P 500 down almost 2%. Since the financial meltdown and deep economic recession of the past three years, investors have been skittish about pouring money into stocks. Today's S&P release shows that every bit of negative news has the potential to derail the stock-market rally. Digging deeper, though, reveals that U.S. equities are attractively valued. While a 10% drop in the market is certainly a possibility, if you're waiting for a double-dip or a retracement to early 2009 levels, odds are that you might be waiting for a long time. TheStreet Ratings' quantitative model -- overseen by a unit of TheStreet -- currently rates 37% of our 6,000 stock universe a "buy," the highest since September 2007 (see graph below). Keep in mind, the model focuses on both risk and reward, looking at not only the fundamentals of a particular stock (such as growth in revenue and cash flow) but also the overall financial strength and possibility of bankruptcy. This leads to a favoritism toward stocks with solid growth, clean balance sheets, strong past relative performance and attractive valuations.
Here's a look at the industries with the largest percentage increase in "buy"-rated stocks over the past six months.
As shown above, our model has become more bullish on several financial industries (thrifts and mortgage finance, and diversified financial services), mostly indicating an improvement in balance sheets, and an increased confidence (for our model) in the overall financial strength for several companies. In particular, Northwest Bancshares ( NWBI) and MarketAxess Holdings ( MKTX) are two of our highest-rated financial companies. In IT services, our model likes Automatic Data Processing ( ADP), Cognizant Technology ( CTSH) and International Business Machines ( IBM). In food and staples retailing, the model has identified Price Smart ( PSMT) and Whole Foods Market ( WFMI) as the most attractive within the industry, mainly driven by an increase in consumer spending. And, at the bottom of this page, are the 10 industries with the largest decline in "buy"-rated stocks over the past six months. Within household products, the model has become more bearish on companies such as Clorox ( CLX) (dropped to "hold" from "buy" in September), based mainly on valuation and slowing profits. Owens Corning ( OC), within the building-products industry, was recently downgraded to "hold" from "buy." Owens Corning, which is up nearly 40% over the past six months, was downgraded by the model because the share price got ahead of earnings prospects. In beverages, our model moved to "hold" from "buy" on Molson Coors ( TAP) due to slowing growth at the beer manufacturer. The company announced a quarterly drop in revenues of nearly 5%.