Spring burst into bloom on Wall Street last week, with the Dow clinching a five-day winning streak.
Good news began to bloom on Monday, when merger news pushed the market up broadly and the Dow gained more than 115 points. A jump in last month's housing starts also helped stocks hop up again on Tuesday. After a quiet start due to preoccupation with the Fed meeting, the three major indices each gained approximately 0.5%.
The official start of spring on Wednesday heralded the FOMC's announcement to leave rates unchanged. That not-unexpected news, together with a softened tone in its policy statement, sent stocks higher still. The Dow gained more than 159 points, the Nasdaq more than 47, and the S&P 500 more than 24.
On Thursday, stocks were mixed in nearly level trading as investors took a breath from the prior day's growth spurt to consider future possible Fed moves. Unexpected strength in February home sales gave root to a further climb for equities on Friday, despite heightened Mideast tension and higher oil prices.
Economic data scheduled for release include new home sales today, consumer confidence tomorrow, durable goods on Wednesday, corporate profits and fourth-quarter gross domestic product on Thursday, and personal income, construction spending, and consumer sentiment on Friday.
Corporations releasing earnings include Dollar General, Tiffany, and Walgreen today, Deutsche Bank, McCormick, and Lennar tomorrow, and A.G. Edwards, Family Dollar, and Red Hat on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
3/23/07 Close |
Weekly Change |
YTD Change |
|
|---|---|---|---|
|
Dow |
12,481.01 |
3.1% |
0.1% |
|
Nasdaq |
2,456.18 |
3.5% |
1.7% |
|
S&P |
1,436.11 |
3.5% |
1.3% |
Commodities
|
Price |
Weekly Change |
|
|---|---|---|
|
Crude oil |
$62.28 |
9.1% |
|
Gold |
$657.30 |
0.5% |
Foolish Quiz
1. The S&P 500 enjoyed its best week in:
(a) three weeks
(b) three months
(c) three years
2. True or false: The Dow's gain on Wednesday was its second-highest run-up in points this year.
3. Which tech reported strong quarterly earnings: Adobe Systems
4. Whose shares dropped more following a downbeat forecast: FedEx
5. True or false: Morgan Stanley
6. Motorola announced the following:
(a) an executive reshuffling
(b) an expansion of its share buyback program
(c) a lowered earnings outlook
(d) a planned acquisition of Palm
(e) all of the above
7. Business deals announced included the following pairs:
(a) Barnes & Noble and Borders
(b) General Motors and Chrysler
(c) NBC Universal and News Corp.
(d) Starbucks and Paul McCartney
8. True or false: The largest merger announced last week involved ABN Amro and Barclays.
9. Which hedge fund announced a stake in American Home Lenders: Blackstone or Citadel?
10. True or false: The Securities Industry and Financial Markets Association recommended a market close in observance of the spring equinox last Wednesday.
Answers
1. (c). It's been three years since the S&P 500 has posted such a large weekly gain.
2. False. Actually, the Dow's 159.42 rise was the biggest daily gain so far this year for the blue-chip index.
3. Both. The two companies each reported earnings on Wednesday. Adobe announced a 37% quarterly profit rise, largely because of a 27% jump in sales. Oracle reported a 35% profit increase with growth across all product lines. Shares of Adobe rose 6.3%, while those of Oracle gained 3.5%.
4. Halliburton. Shares of the energy giant were the most heavily traded on the Big Board on Tuesday and plunged 5.9% after the company cut its first-quarter forecast. Shares of FedEx fell 1.2% on Wednesday after it announced a 1.9% decline in quarterly profits, and lowered its fourth-quarter outlook on concerns over a slowing economy.
5. False. On Wednesday, Morgan Stanley reported a 70% first-quarter profit jump, aided by a $109 million divestiture gain and increased trading volumes. On the same day, a Florida court also overturned a verdict requiring the firm to pay more than $1.57 billion to Ronald Perelman for allegedly misleading him about the financial viability of Sunbeam. Shares rose 6.9%.
6. (a), (b), (c). Late Wednesday, Motorola forecast a first-quarter loss and a lower-than-expected annual profit because of declining handset sales, a factor which also diminished speculation that it may acquire Palm. The company agreed to use more of its $11 billion cash reserve to buy back shares and reshuffled several top executives. Shares lost 2.4% for the week, despite a boost on Friday from news that Carl Icahn had upped his stake in the company.
7. (c), (d). On Friday, NBC, a unit of General Electric, and News Corp. made public plans to work together. Their Internet "video distribution network" will compete with Google's YouTube, and will also distribute the videos to most Internet portals. Earlier in the week, it was revealed that Paul McCartney will make music with Starbucks by becoming the first musician to sign with the coffee company's label, Hear Music.
No upcoming deals are in the works for the booksellers, though, both of which reported earnings. Barnes & Noble reported a 3% rise in quarterly profits, while Borders posted a loss. Borders may steal a page from its rival by staging a turnaround effort, including downsizing its Waldenbooks chain and selecting more attractive locations. As for autos, reports emerged Friday of a possible acquisition of Chrysler by Canadian auto parts supplier Magna International, and General Motors disclosed restricted stock unit grants to top executives for the first time in several years. Shares of DaimlerChrysler rose 6.1% and shares of General Motors advanced 5.5%.
8. False. Despite shares of ABN Amro rising 14.1% on Monday, the rumored merger of the two European banks so far remains just that. Adding to the intrigue was a report by The Wall Street Journal on Friday that Citigroup may also bid for the Dutch bank.
For the week, shares of each bank rose, with ABN Amro jumping 19.3%, Barclays rising 11.1%, and Citigroup gaining 5.1%.
9. Citadel. According to SEC filings, Citadel reported a 4.5% position in Accredited Home Lenders, while fellow hedge fund Farallon Capital made public a 6.9% stake. This news cheered investors, who sent shares of the troubled subprime lender up 11.2% on Wednesday. Blackstone, meanwhile, was busy preparing its registration statement, filed on Thursday, for a $4 billion offering for a 10% stake in its management company. With a $6 billion profit over the past five years, who needs to dabble in subprime?
10. True -- but only with respect to the trading of U.S. dollar-denominated fixed-income securities in Japan. Happy spring!
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 is a Motley Fool Inside Value pick. Family Dollar, Palm and FedEx 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 Google. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
