There WILL Be a Quiz: Weekly Markets Recap

Unlike the Democratic debate, bears emerged as last week's clear winner on Wall Street.

Stocks opened the week strongly, buoyed by merger activity, as they rebounded on Monday from the prior session's sell-off. The Dow bounced back 92 points, the S&P 500 more than 7, and the Nasdaq nearly 3. On Tuesday, subprime worries resurfaced and joined forces with weak earnings to trounce equities, as the major indices sank nearly 2%. Volatile trading ensued on Wednesday, when good corporate earnings and a weak home sales report vied to determine the direction of the market. Stocks closed higher, with the Dow finishing up 68 points.

Any remaining politics of hope came to an end on Thursday. Fears of a widening credit crunch and soft economic data sent stocks plunging broadly, with the Dow and S&P 500 each suffering losses of 2.3%. Despite data showing moderate GDP growth, jitters persisted on Friday. Stocks fell again, racking up a 208-point loss for the Dow and the worst one-week percentage decline for the S&P 500 in almost five years.

Everything will be in focus as the week opens, with worried investors surveying the damage. The most significant economic release will be Friday's July employment report. Other data on tap includes the employment cost index and personal income and construction spending tomorrow, the ISM manufacturing report and July auto sales on Wednesday, factory orders on Thursday, and the ISM services report on Friday.

Corporations posting earnings include Anadarko, Verizon, and Wrigley today; CBS and General Motors tomorrow; Starbucks on Wednesday; International Paper, NYSE Euronext, and Viacom on Thursday; and Procter & Gamble, Washington Post, and Weyerhaeuser on Friday.

Stay market-tuned and Foolish!

Capital Markets Summary

U.S. Equities

Commodities

Foolish quiz
1. Trading curbs on the Big Board last week went into effect: (a) once, (b) twice, (c) not at all.

2. True or false: 3M (NYSE:MMM) was the Dow's lone winner on Thursday.

3. The Transocean (NYSE:RIG)/Global SantaFe (NYSE:GSF) deal includes: (a) a cash payment to shareholders of each company, (b) stock in the new company, (c) both.

4. True or false: Countrywide Financial (NYSE:CFC) sank to a new 52-week low after posting earnings.

5. True or false: Amazon.com (NASDAQ:AMZN) amazed shareholders on Wednesday with its largest point gain since its IPO.

6. True or false: Ford drove off with its first profit in two years.

7. Which company's earnings beat expectations: Boeing or General Dynamics?

8. Which company served up earnings more to shareholders' tastes: McDonald's or PepsiCo?

9. Which sector fared worse: broker-dealers or homebuilders?

10. Which sponsor of the Democratic debate fared better last week: Google or Time Warner?

Answers
1. (b). Trading curbs went into effect twice last week on the Big Board. Tuesday marked the first time the curbs were used since mid-March, and they were used again on Thursday, a day in which the Dow dropped more than 400 points before recovering to close down a mere 311.50 points, its second-biggest point loss of the year.

2. True. A 0.8% gain in 3M shares made it the only gainer among the Dow's 30 components on Thursday. The advance came following the company's report of a better-than-expected 3.9% rise in its second-quarter profit, and an increase in its guidance for the full year.

3. (c). Finance students, take note -- in a massive merger announced Monday, two of the largest oil drillers introduced a new deal structure which takes advantage of the companies' low debt levels and high cash flow. The transaction combines a $15 billion leveraged recap, backed by a one-year bridge loan, with a stock-for-stock swap that gives no premium to shareholders. The new company will be valued at approximately $53 billion, including debt, and retain the Transocean name and ticker symbol.

4. True. Maybe this question is too easy. Shares of Countrywide tumbled to a new 52-week low on Tuesday, after sending shudders through Wall Street when it missed second-quarter earnings by a wide margin and lowered its full-year guidance. Shares hit fresh lows each consecutive day, with Friday's $28.41 standing as the current 52-week low.

5. True. Amazon's 16.9 point gain, a 24.4% increase, was its largest since it went public on May 15, 1997. The rise came after the company posted a more than tripling of its second-quarter profit on strong sales across product lines, and increased its full-year revenue guidance.

6. True. Helped by cost-cutting and improvement in its auto sales, Ford surprised Wall Street by swinging to a second-quarter profit, its first in two years. The company also said it's exploring a sale of its Jaguar and Land Rover units and is conducting a strategic review of its Volvo brand. Shares rose 1.5% on Thursday, even as CEO Alan Mulally said he expects a "difficult" second half and negative cash flow as the automaker's restructuring continues.

7. Both. Boeing soared past forecasts when it announced that it had swung to a $1.05 billion second-quarter profit, and said that its Dreamliner deliveries should fly in on schedule in May. The company was the Dow's top performer, as shares rose 3.3% on Wednesday to a new all-time closing high of $107.23. General Dynamics also topped expectations the same day, propelled by solid strength in its private jet and combat equipment revenues, even though it posted a 19% fall in second-quarter profits because of one-time charges. Shares climbed 3.5%.

8. PepsiCo. The soda and chip company posted a 13% increase in its second-quarter profit and raised its full-year outlook. Meanwhile, McDonald's posted a second-quarter loss of $711.7 million, only its second quarterly loss ever. The fast-food company blamed a $1.6 billion one-time charge related to the sale of certain Latin American and Caribbean operations, without which net income would have risen by 4%. In addition to sandwich talk and chatter about testing more coffee drinks, Mickey D's said the company was reviewing its capital structure, and any changes might be made this fall.

9. Homebuilders. Neither sector had much to be proud of this week, but the 6.7% loss in the Amex BrokerDealer Index beat the 10.2% loss in the Philadelphia Housing Index. In addition to general concerns about the health of housing, several companies such as Beazer Homes and D.R. Horton posted quarterly losses.

10. Google. While YouTube did well last week by garnering attention with 2.6 million folks tuned into the Democratic presidential debate, shares of its parent company, Google, lost 1.6%, and those of co-sponsor CNN's parent, Time Warner, dropped 4.7%. Even a melting snowman looked in better shape.

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!

3M is a Motley Fool Inside Value pick. Amazon.com, Starbucks, and Time Warner are Motley Fool Stock Advisor selections. Wrigley is a Motley Fool 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's disclosure policy does better on the essay questions.