There WILL Be a Quiz: Weekly Markets Recap

Leprechauns hid their pots of gold from investors last week, amid worries of spreading home loan defaults and their economic impact.

Stocks rose Monday in volatile trading, as merger news and lower oil prices overcame worries in the subprime mortgage sector.

Investors' luck changed on Tuesday. Stocks plummeted as mortgage industry concerns continued, and retail sales disappointed. Each of the major indexes lost 2% or more, and the Dow toppled more than 242 points.

The market cobbled together gains over the next two days. On Wednesday, stocks finished higher after a volatile session marked by technical trading bounces, with the Dow bumping around a 200-point range. Volatility subsided on Thursday, with stocks managing small gains amid mixed economic data.

On Friday, investors' eyes weren't smiling after release of the consumer price index revealed an inflationary upturn and diminished hopes of a Fed rate cut. High volume but lethargic trading resulted in losses for the market.

The market will focus on housing news and the Federal Open Market Committee announcement due Wednesday afternoon. Economic data scheduled for release includes the housing market index today, housing starts tomorrow, leading indicators on Thursday, and existing home sales on Friday.

Corporations reporting earnings include Adobe Systems and Oracle tomorrow, FedEx, Morgan Stanley, Darden Restaurants, and Stein Mart on Wednesday, Barnes & Noble, Borders, ConAgra, General Mills, and Palm on Thursday, and Freddie Mac on Friday.

Stay market-tuned and Foolish!

Capital Markets Summary

U.S. Equities

Commodities

Foolish Quiz
1. Which sector proved the luckiest for investors last week?
(a) broker-dealers
(b) retail
(c) utilities

2. True or false: The Dow fell below 12,000 for the first time since November.

3. Which investment bank reported stronger quarterly earnings: Goldman Sachs (NYSE:GS) or Lehman Brothers (NYSE:LEH)?

4. True or false: General Motors (NYSE:GM) delivered an upbeat earnings report.

5. Which Windy City futures exchange received an unsolicited offer: CBOT or CME?

6. Which discount retailer attracted a big spender: Dollar General or Family Dollar?

7. Which subprime lender was suspended from the Big Board: Accredited Home Lenders or New Century Financial?

8. Which retail segment turned in strong February sales?
(a) building material stores
(b) clothing stores
(c) restaurants
(d) all of the above
(e) none of the above

9. True or false: Blackstone Group would like to follow the footsteps of Fortress Investment Group.

10. What was one more likely to encounter on Wall Street on Friday: leprechauns or witches?

Answers
1. (c). The Dow Jones Utilities Index rose 0.5%, while the Amex Broker-Dealer Index declined 3.1% despite solid earnings reports, and the S&P Retail Index dropped 2%.

2. True. On Wednesday, the Dow dropped below 12,000 for the first time since Nov. 6.

3. Goldman Sachs. The investment bank once again appeared to be the House of Gold when it reported stronger-than-expected 29% quarterly earnings growth on Tuesday. Shares declined 1.8% during a down day for the market.

Lehman reported a 5.6% quarterly earnings increase the following day, but shares fell 0.4% as investors fretted over exposure to the subprime mortgage market, even though its impact appeared contained.

Not to be left out, Bear Stearns, the third major Wall Street house reporting earnings last week, actually came in second in terms of earnings growth. It announced an 8% increase on Thursday, sending its shares up 2.2%.

4. True. General Motors swung to a $950 million fourth-quarter profit from a $6.6 million loss a year ago, and reported that its cost-cutting measures are working out as the company continues its restructuring. Shares slipped 0.9% as investors worried about the company's ability to remain profitable, and the effect of mortgage losses on its GMAC financing arm.

5. CBOT. The Intercontinental Exchange, an electronic commodities trading platform, announced an unsolicited $9.9 billion bid for CBOT on Thursday, challenging its anticipated $8 billion merger with cross-town CME. Shares of CBOT soared 17.4%, while those of ICE melted 2.9%, and CME shed 5.5%.

6. Dollar General. Merger Monday brought news that buyout firm Kohlberg Kravis Roberts will purchase Dollar General for $6.9 billion, plus assumed debt of $380 million. Shares soared 25.6%, while those of Family Dollar also pocketed a buck, rising 5.7%.

7. New Century. The week started poorly for the subprime sector; shares of New Century were suspended from trading early Monday, following the company's announcement that its bank lenders had cut off short-term funding. The company received a grand jury subpoena from the U.S. Attorney's Office, and the SEC is also initiating an investigation into the company. The shares closed on Friday at $1.66 on the Pink Sheets. Peer Accredited Home Lenders also experienced shades of red, acknowledging mounting margin calls and forced loan repurchases. Shares jumped later in the week, after the company agreed to sell $2.7 billion in loans at a deep discount, and rumors of potential buyers re-examining the sector emerged.

8. (e). Perhaps the cold kept shoppers home last month, contributing to a 0.1% decrease in retail sales, excluding auto sales. Among the worst decliners, sales at building material and garden stores, such as Home Depot and Lowe's, fell 1.4%, purchases at clothing retailers declined 1.8%, and dining at restaurants dropped off 1.2%. The Commerce Department's report on Tuesday sent a shiver through the stock market, as investors fretted over signs of restrained consumer spending.

9. Trick question! Private equity group Blackstone is reportedly seeking to go public with an offering representing approximately 10% of its management company, following the lead of Fortress, the first U.S. hedge fund to go public. Blackstone would probably like to fare better than Fortress, however. The latter's shares have declined 26.5% from their opening trading price.

10. Witches. Friday marked quarterly quadruple witching, the expiration of stock index futures, stock index options, stock options, and single stock futures, and a cause of market volatility.

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!

Borders Group is a Motley Fool Inside Value picks. FedEx, Palm, and Family Dollar are Motley Fool Stock Advisor selections. 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. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.