While alchemy turned Blackstone into gold for its founders, the rest of the market tarnished last week.
The market languished on Monday after its prior week's run-up. Stocks ended narrowly lower amid rising oil prices, interest rate worries, and corporate merger activity. Lower bond yields helped stocks rise modestly on Tuesday, despite high oil prices and a weak report on housing starts.
Volatility returned on Wednesday. Higher bond yields pushed the three major indices down more than 1% during a session that began with the Dow just 2 points shy of its record close, and ended with the-blue chip index down 146 points. On Thursday, choppy trading induced by higher bond yields and concerns over the subprime impact ended with stocks higher by the close of trading. These worries, coupled with higher oil prices, continued on Friday and brought the market down sharply again, while the eagerly anticipated Blackstone IPO met with success and its founders reaped billions.
No treasures are expected from the Fed this week as it meets Wednesday to discuss interest rates. The Fed will announce its decision Thursday afternoon, and it's expected that rates will remain unchanged. Economic data scheduled for release include existing home sales today, consumer confidence and new home sales tomorrow, durable goods on Wednesday, gross domestic product on Thursday, and personal income and construction spending on Friday.
Corporations posting earnings include Walgreen today, Lennar, Nike, and Oracle tomorrow, ConAgra, and Red Hat on Wednesday, followed by Constellation Brands, General Mills, and Monsanto on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
6/22/07 Close |
Weekly Change |
YTD Change |
|
|---|---|---|---|
|
Dow |
13,360.26 |
(2.0%) |
7.2% |
|
Nasdaq |
2,588.96 |
(1.4%) |
7.2% |
|
S&P 500 |
1,502.56 |
(2.0%) |
5.9% |
Commodities
|
Price |
Weekly Change |
|
|---|---|---|
|
Crude oil |
$69.14 |
1.68% |
|
Gold |
$657.00 |
(0.26%) |
Foolish quiz
1. True or false: Last week, the Dow and S&P 500 suffered their worst weekly losses so far this year.
2. True or false: The Blackstone
3. True or false: Morgan Stanley
4. True or false: Bear Stearns
5. True or false: Best Buy
6. True or false: Yahoo
7. True or false: Circuit City raised its guidance.
8. True or false: FedEx delivered weak results.
9. True or false: Home Depot plans to improve its share buyback plan.
10. Which company's shares would have given you a better trip last week: Carnival or Expedia?
Answers
1. False. Although the market stumbled, the year's worst weekly losses came in late February for the Dow and in early March for the S&P 500.
2. True. Blackstone's deal size of $4.1 billion ranks as the largest IPO in almost five years. Shares rose 13.1% on Friday, its first day of trading, despite a market downturn and concerns that lawmakers may raise the tax rate on limited partnerships.
3. False. Morgan Stanley didn't post record quarterly profits on Wednesday but did blow past Wall Street rivals Lehman, Goldman Sachs, and Bear Stearns, which reported the prior week. The investment bank posted a 39% rise in second-quarter profit, as investment banking revenue rose 65% and hit a record $1.7 billion. Even fixed-income revenue rose 34%. Shares of Morgan Stanley nevertheless slipped 0.4%, reflecting the pain felt by two large hedge funds managed by Bear Stearns with subprime exposure as they struggled to meet their obligations.
4. False. The Bear stepped in on Friday to offer $3.2 billion in loans to save one of its two troubled funds, while continuing to reviews solutions for the other. Shares fell 1.4%.
5. False. On Tuesday, Best Buy reported an unexpected 18% drop in first-quarter earnings, which were affected by weak profits in China and lower-margin product sales. The company also lowered its guidance for fiscal 2008, citing consumer spending concerns. Shares fell 5.9%.
6. False. Yahoo announced late Monday that CEO Terry Semel is stepping aside for co-founder Jerry Yang to take charge. Shares fell 1.7% on Tuesday on continuing concerns but recovered to gain 0.3% for the week.
7. False. Shares of Circuit City advanced 0.2% on Wednesday despite posting first-quarter earnings in which it swung to a first-quarter net loss and withdrew its guidance because of its restructuring and an "uncertain macroeconomic environment". Management expects earnings volatility to persist in the short term.
8. False. Shares of FedEx rose 1.6% on Wednesday after the company announced a 7.4% increase in fourth-quarter profit. The company forecasts continued sluggishness in earnings growth for 2008 because of economic softness and planned investments, although it expects to see improvements in late summer to early fall.
9. True. Home Depot announced an increase of up to $22.5 billion in its share repurchase plan, more than a quarter of its market cap, funded by the $10.3 billion sale of its Home Depot Supply unit to private equity investors and by more leverage. While shares rose 4.6%, Moody's and Standard & Poor's have placed the company's ratings under review for a possible downgrade.
10. Expedia. Shares of Expedia traveled 14.3% higher for the week, as investors cheered its $3.5 billion share repurchase announcement. Carnival also had some fun as the company's second-quarter earnings cruised up nearly 3% despite higher fuel costs and weak bookings in the Caribbean, but shares slipped 0.8% for the week. If you're looking to set sail with the company, note that while it lowered its full-year guidance because of energy expenses, it's tootin' its horn that bookings in the Caribbean are on the rise. Bon voyage!
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!
Home Depot is a Motley Fool Inside Value pick. Best Buy, Yahoo!, 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 Goldman Sachs. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
