There WILL Be a Quiz: Weekly Markets Recap

Just in time for Father's Day, moderating bond yields and benign inflationary figures lifted equities strongly enough to jolt Dad right off the couch.

Stocks entered Monday resting from the prior week's losses. Despite still-rising bond yields and late-session weakness, stocks ended nearly flat. On Tuesday, stocks retreated, as bond yields advanced and the 10-year Treasury hit 5.27%, its highest rate in five years. The major equity indices closed with losses near 1%.

Those losses reversed on Wednesday, when the 10-year yield slipped, retail sales came in strong, and the Beige Book revealed moderate economic growth. The upward trend continued on Thursday, with the Dow rising more than 71 points to claim its biggest two-day rally since August.

On Friday, a tame consumer price index report brought another day of gains amid heavy trading volume, thanks to options and futures expiration. Stocks rose broadly, with the S&P 500 notching its best weekly gain since April.

A relatively quiet week awaits number-crunchers. Economic data scheduled for release includes housing starts tomorrow and leading economic indicators on Thursday. Corporations posting earnings include Sharper Image today, Best Buy and Carnival tomorrow, Circuit City, FedEx, and Morgan Stanley on Wednesday, and H&R Block on Thursday.

Stay market-tuned and Foolish!

Capital Markets Summary

U.S. Equities

6/15/07 Close

Weekly Change

YTD Change

Dow

13,639.48        

1.6%

9.4%

Nasdaq

2,626.71

2.1%

8.8%

S&P 500

1,532.91

1.7%

8.1%

Commodities

Price

Weekly Change

Crude oil

$68.00

5.33%

Gold

$658.70

1.29%

Foolish Quiz
1. True or false: The Dow seems to enjoy Fridays.

2. True or false: Intel (Nasdaq: INTC  ) led the Dow higher on Friday.

3. True or false: Lehman Brothers (NYSE: LEH  ) posted record net income.

4. True or false: Goldman Sachs (NYSE: GS  ) posted record net income.

5. True or false: Subprime problems damaged earnings at Bear Stearns (NYSE: BSC  ) .

6. True or false: U.S. Steel (NYSE: X  ) welded together a profitable week.

7. Who does CBOT Holdings favor as a merger partner: the Chicago Mercantile Exchange or Intercontinental Exchange?

8. Who does Nymex favor as a merger partner: NYSE Euronext or Nasdaq?

9. True or false: Casino stocks were a smart bet last week.

10. Which company's shares would have impressed Dad more last week: Blockbuster or Netflix?

Answers
1. True. The Dow has risen the past 13 consecutive Fridays.

2. True. Intel rallied 4.4% on Friday, leading the Dow, after it received an upgrade from Goldman Sachs from "neutral" to "buy."

3. True. On Tuesday, shares of Lehman gained 0.5%, after the firm reported a 27% increase in second-quarter profit, to a record $1.3 billion. Strong trading and deal activity led the earnings, while fixed income slumped. Management assured investors that "subprime challenges" are contained.

4. False. Unlike Lehman, Goldman's second-quarter profit merely inched forward, up 0.9%, as weakness in the firm's mortgage business hurt strength in its banking and asset-management segments. Following the firm's report on Thursday, shares fell 3.4%.   

5. True. Of the three major Wall Street banks posting earnings last week, Bear Stearns came in last. Shares still advanced 0.1% on Thursday, after the firm posted a 33% drop in second-quarter profit resulting from a downturn in its mortgage-backed bond business. Management said its results will stay sluggish until the mortgage market turns around.

6. False. Shares of U.S. Steel got hammered last week, dropping 7.1%. Two factors contributed to the sell-off. First, German steelmaker ThyssenKrupp denied that it was in acquisition talks with the company. Later, Bear Stearns downgraded its rating on U.S. Steel from "outperform" to "peer perform," citing current fair valuation.

7. The Chicago Merc. It was a busy week for the Chicago Board of Trade. On Tuesday, ICE revised its hostile bid for the exchange in several ways, including the provision that shareholders could receive cash instead of stock. Two days later, CBOT rejected that bid, shortly after the Merc offered to increase its $10 billion bid with a special one-time dividend of $9.14 per share. The fight continues; ICE said it would wage a proxy vote to urge shareholders to vote against the Merc's CBOT-endorsed acquisition, which is scheduled for a vote on July 9. For the week, shares of CBOT gained 4.3%.

8. NYSE Euronext. Shares of Nymex gained 1.7% on Friday, following a report by Bloomberg that the futures exchange is considering a potential $14 billion sale to NYSE Euronext, Deutsche Bank, or the CME. Nasdaq wasn't mentioned.

9. True. Shares of Penn National Gaming surged 21.5% on Friday, after it agreed to Fortress Investment Group's $6.1 billion buyout offer. Other gaming stocks' shareholders felt pretty lucky, too. Isle of Capri, Pinnacle Entertainment, and MGM Mirage rose 10.8%, and 8.3%, and 4.3%, respectively.

10. Blockbuster. Had you bought the video chain's shares, you might have gotten a pat on the back from Dad. Shares of the company gained 10.9% for the week, following its announcement of lower-priced plans for online rentals, undercutting rival Netflix's similar plan by $1. Shares of Netflix fell 15.9% for the week as it suffered downgrades from various analysts.

It's never too late to impress Dad. If you're still seeking to curry favor, check out the Fool's suggestions in Happy Foolish Father's Day.

Scoring

  • 8-10 correct: Foolishly impressive.
  • 6-7 correct: Almost Foolish.
  • 1-5 correct: OK, but just barely.
  • 0 correct: Really?! Keep reading the Fool, and watch your scores improve!

Intel and Nasdaq are Motley Fool Inside Value picks. Best Buy, FedEx, and Netflix are Motley Fool Stock Advisor selections. Sharper Image is a Hidden Gems Pay Dirt pick. Whatever your investing style, the Fool has a newsletter for you.

Fool contributor S.J. Caplan, a former vice president and assistant general counsel of Goldman Sachs and former vice president and derivative finance specialist at Lehman Brothers, owns shares of Goldman Sachs and NYSE Euronext. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.


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