Last week began with the forecast of an above normal number of hurricanes. Luckily for investors, Wall Street finally blew away some of its own inflationary predictions and headed into the long weekend on a gust of positive stock performance.
The market opened gloomily on Monday, with volatile trading sending the indices down. Technology took the most direct hit, and the Nasdaq dropped 1%. The pattern repeated on Tuesday, as equities gained until the final hour, when rising oil prices and sell-offs in Brazil and Mexico sent stock prices into the red. On Wednesday the clouds began to lift; stocks finished modestly higher, rising on mixed economic news, which included a decline in last month's durable goods, but a stronger-than-expected increase in new home sales. Techs now showed strength, pushing the Nasdaq up over 10 points. A benign GDP report and convictions of top Enron execs further heated up the markets Thursday, as prices climbed higher into sunny skies. Each of the major indices finished strongly. The winning streak continued Friday, with equities buoyed by data indicating an increase in consumer spending without accompanying inflation.
Markets were closed yesterday for Memorial Day. Economic reports scheduled for release include consumer confidence data on Wednesday; productivity, construction figures, and last month's retail and auto sales data on Thursday; and the closely watched employment numbers for May on Friday. The minutes from the Fed's last policy meeting will also be published on Wednesday.
A relatively quiet corporate calendar includes earnings reports from Albertson's tomorrow; Costco, Hovnanian, and Tiffany on Wednesday; and H.J. Heinz on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary:
U.S. Equities
| 5-26-06 Close | Weekly Change (%) |
YTD Change (%) |
|
|---|---|---|---|
| Dow | 11,278.61 | 1.2 | 5.2 |
| Nasdaq | 2,210.37 | 0.8 | 0.2 |
| S&P | 1,280.16 | 1 | 2.6 |
Commodities
| Price ($) | Weekly Change (%) | |
|---|---|---|
| Crude oil | 71.30 | 4.04 |
| Gold | 660 | 0.35 |
Foolish Quiz:
1. Heading into the long weekend, this sector led equities higher:
__ (a). consumer goods
__ (b). financials
__ (c). precious metals
__ (d). tech
2. The S&P 500 reached its lowest point of the year last week.
__ True __ False
3. This company's shares jumped more from its earnings release than other reporting companies last week:
__ (a). Big Lots
__ (b). Campbell
__ (c). Medtronic
__ (d). Toll Brothers
4. Last Tuesday's news that Fannie Mae
__ True __ False
5. Potential merger news last week included:
__ (a). AmSouth Bancorp
__ (b). eBay
__ (c). Main Street Restaurant Group
__ (d). NYSE Group
__ (e). Verizon Communications
6. One would have fared better last week investing in:
__ (a). gold
__ (b). gold miners
7. Successful IPOs launched last week included:
__ (a). Bank of China
__ (b). MasterCard
__ (c). Vonage
__ (d). all of the above
8. Kenneth Lay was found guilty of insider trading.
__ True __ False
9. If planning a holiday drive, be glad if you don't have to fill up near:
__ (a). Cleveland
__ (b). Denver
__ (c). New York
__ (d). San Francisco
10. If a summer trip takes you to Europe, bear in mind that you still can't buy a Bud in Budapest.
__ True __ False
Answers:
1. (b). Financials led the market higher on Friday, owing in part to analyst upgrades of Goldman Sachs
2. True. The S&P 500 fell to 1245.34, its lowest level of the year, during Wednesday's trading session. It later climbed 13 points in the final hours.
3. (a). Close-out merchandiser Big Lots enjoyed a lots bigger boost from its first-quarter earnings report. Shares jumped 21% on Thursday, after the company announced a 76% increase in profits and raised its full-year forecast. Campbell Soup also dished out an appetizing report Monday, when it reported a 14% rise in its third-quarter profits. Toll Brothers built a 1.7% gain in its shares Tuesday, following the homebuilder's announcement of a 3% rise in second-quarter net income. On Wednesday, shares of Medtronic pumped up 4% after the medical device maker reported in-line fourth-quarter earnings and raised its guidance for fiscal 2007.
4. False. Although the mortgage lender was fined over $400 million and must limit its portfolio mortgage assets to the level held at the end of last year, shares rose 0.9% when federal regulators issued their report on Tuesday.
5. (a), (c), and (d). Alabama banks AmSouth and Regions Financial announced a $9.8 billion stock deal which would create this country's tenth-largest bank in terms of market cap. Following the announcement, shares of both banks fell 3.1% on Thursday. Shares of Main Street leapt 19.4% Monday, after it said it had agreed to be acquired by The Briad Group for $6.40 per share, a 20.5% premium above the prior session's closing price. On Monday the NYSE announced a $10.2 billion cash and stock offer for European exchange Euronext. The European exchange has not made its decision, but said the next day at its annual meeting that it prefers the NYSE's proposal to a competing bid from Deutsche Boerse. No mergers were in the public eye for eBay, but on Thursday the company announced a multi-year strategic partnership with Yahoo! to help it compete with the likes of AOL, Google, and Microsoft. News of the alliance sent shares of eBay up 12% and Yahoo up 3.6%. Finally, Verizon shares rose 0.5% Tuesday, after its finance chief deemed it unlikely that the company would purchase Vodafone Group's ownership position in its U.S. wireless business.
6. (b). Based on the performances of two exchange traded funds, the Market Vectors-Gold Miners and the StreetTRACKS Gold Trust, the miners beat the metals -- from their open last Monday to their close on Friday -- 5.6% to 1.1% in last week's trading. The gold miners ETF began trading Monday as the first U.S. ETF focusing on the gold-mining equity markets by tracking the Amex Gold Miners Index.
7. (b). MasterCard ended the week at $44.93, 15.2% above its $39 initial price. The $2.4 billion offering was the largest IPO in this country in two years. Partial credit is awarded if you answered (a). Although it won't begin trading on Hong Kong's stock exchange until Thursday, China's biggest IPO was priced Wednesday at the top end of its expected trading range, at 2.95 Hong Kong dollars. The voice-over-IP telephone service provider heard nothing but static as its shares sunk 23.4% for the week, after trading began Wednesday at $17.
8. False. No such charges were brought against former Enron Chairman Lay, although former President Jeffrey Skilling was found guilty on one such count. Lay and Skilling were found guilty on various fraud and conspiracy charges relating to Enron's collapse and will be sentenced in September.9. (d). Regional gas price data provided last week from the AP showed that San Franciscans paid the highest prices for gas, at $3.321 per gallon, owing to state environmental standards and local taxes. Clevelanders paid the least at $2.763 because of a lack of special state environmental standards and its location within 200 miles of a pipeline.
10. False. A Hungarian appeals court ruled last week that Anheuser-Busch can sell its Budweiser beer there, upholding a lower court ruling denying that a Czech company had exclusive rights to the name.
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!
AmSouth Bancorp is an Income Investor selection, eBay is a Stock Advisor pick, and Microsoft and Vodafone are Inside Value recommendations. 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 and The New York Stock Exchange Group. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
