Solid corporate earnings and signs of Fed steadiness quarterbacked a winning week for stocks.
After an initial kickoff into positive territory, stocks pulled back and finished narrowly mixed on Monday. On Tuesday, stocks began lethargically but took off midday to finish with modest gains ahead of the Federal Reserve meeting.
Stocks continued their blitz for the next two days. Trading began on Wednesday with an early boost from economic readings showing economic growth with declining inflation. The Fed's afternoon policy announcement pushed the market even higher. As expected, the Fed left interest rates unchanged but acknowledged moderating inflation and a stabilizing housing market. Stocks rallied broadly, with the Dow closing up more than 98 points. On Thursday, the market scored another victory as the Dow reached 12,673.68, a record closing high.
Fatigued from the week's run and a mostly positive January jobs report, stocks fumbled a bit on Friday to end the session narrowly mixed.
Economic data scheduled to be released for the week ahead includes the ISM non-manufacturing survey today, fourth-quarter productivity and consumer credit on Wednesday, and wholesale trade on Thursday.
Corporations announcing earnings this week include Anadarko Petroleum, Humana, and Pitney Bowes today, and Cisco, Tyco, and Wrigley tomorrow. On Wednesday, we'll hear from Cigna, Tim Hortons, and Walt Disney, followed by Aetna, GlaxoSmithKline, Level 3, and PepsiCo on Thursday. Friday will bring reports from Lions Gate, MasterCard, and Weyerhaeuser.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
2/2/07 Close |
Weekly Change |
YTD Change |
|
|---|---|---|---|
|
Dow |
12,653.49 |
1.3% |
1.5% |
|
Nasdaq |
2,475.88 |
1.7% |
2.5% |
|
S&P |
1,448.39 |
1.8% |
2.1% |
Commodities
|
Price |
Weekly Change |
|
|---|---|---|
|
Crude Oil |
$59.09 |
6.41% |
|
Gold |
$653.10 |
0.21% |
Foolish quiz
1. True or false: The S&P 500 enjoyed its best week in five months.
2. These events occurred last Wednesday: (a) The Dow enjoyed its best day of 2007, (b) the S&P 500 closed with its eighth consecutive monthly gain, (c) the president visited the Big Board's trading floor, (d) Punxsutawney Phil visited the Big Board's trading floor.
3. ExxonMobil
4. True or false: Shares of Dell
5. Which Internet company reported stronger earnings: Amazon
6. This drug company's shares rose amid merger speculation: (a) Bristol-Myers Squibb, (b) Merck, (c) Schering-Plough.
7. True or false: US Airways sealed the deal with Delta by raising its bid.
8. Sale of which toy helped rack up better earnings for its parent company: Elmo or video games?
9. "As January goes, so goes the year" applies to: (a) the Dow, (b) the Nasdaq, (c) the S&P 500.
10. True or false: The Colts' Super Bowl victory bodes well for stocks.
Answers
1. True. Energy producers and benign economic data led the index to its largest weekly gain since August.
2. (a), (b), (c). The market closed out the final day of January on a high note, although the Dow further outdid itself the next day. No signs of the groundhog were reported. We can presume that he was preparing for his big outing on Friday, an event that energy traders eagerly awaited.
3. (b). ExxonMobil reported a 4.3% drop in fourth-quarter profits as a result of lower energy prices on Thursday, but it still recorded a $39.5 billion annual profit, the biggest ever for a U.S. corporation.
4. False. Shares of Dell fell 1.7% on Thursday following the company's announcement late the previous day that Mr. Dell will return as CEO as the troubled computer maker seeks to improve performance. The company issued an earnings warning for the fourth quarter at the same time.
5. Google. The Internet search engine weighed in late Wednesday by more than doubling fourth-quarter profit and posting a 97% surge in revenues. Lower operating margins, however, disappointed investors who sent shares down 3.9% on Thursday. Internet retailer Amazon posted a 51% decline in quarterly profit and a 34% growth in revenues late on Thursday but forecasted stronger-than-expected guidance for the year. Shares fell 3.4% on Friday.
6. (a). Shares of Bristol-Myers Squibb gained 4.7% on Monday and 9.3% for the week amid rumors that the company may merge with Sanofi-Aventis. In other sector news last week, Merck revealed a 58% drop in fourth-quarter net income while Schering-Plough announced that it amassed a 62% rise in fourth-quarter profits.
7. False. Delta left US Airways stranded at the takeover gate. The unsecured-creditors committee of Delta, preferring to emerge from bankruptcy proceedings as an independent company, rejected the $9.8 billion hostile bid by US Airways. The fallout from the deal is expected to put further consolidation plans in the industry on standby status.
8. Elmo. The furry red guy helped Mattel ring up a 2.6% rise in fourth-quarter profits, although shares advanced only a penny following the report on Monday. Electronic Arts, however, posted a 38% drop in third-quarter profits after the bell on Thursday, yet it saw its shares rise 1.2% the next day as results beat expectations and investors embraced the planned introduction of a slate of new games.
9. (c). The Stock Trader's Almanac reports that when the S&P 500 finishes January in positive territory, the market has done well for the year 91% of the time since 1950. Bring it on!
10. True. Actually, though, it just didn't matter. The Super Bowl Indicator states that a victory by one of the NFL original or NFC expansion teams is bullish for stocks, while a win by one of the AFL original or AFC expansion teams is bearish. This year, however, the guidelines for the indicator didn't apply because both teams were in the old NFL before its merger with the AFL in 1970. Enough with the Fedheads ... let's take a look at the guys on the field for inspiration.
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!
Tyco and MasterCard are Motley Fool Inside Value picks. Disney and Amazon are Motley Fool Stock Advisor selections. Pitney Bowes, Wrigley, and GlaxoSmithKline are Motley Fool Income Investor picks. Dell is an Inside Value and Stock Advisor pick. Merck is a former Income Investor 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 Google. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
