While some celebrated the summer solstice last week, Wall Street paid homage to the upcoming Federal Reserve meeting. Stocks orbited between positive and negative territory in a quiet week void of major data and marked by low volume.
The week began unenthusiastically, with stocks declining on Monday amid concerns over North Korea, a drop in oil prices, and weak housing data. A better report on the housing market helped lift the Dow moderately on Tuesday, while the S&P 500 and Nasdaq inched downwards. Trading remained light as many investors stayed on the sidelines prior to the Fed meeting.
The market made merry on Wednesday, the longest day in the northern hemisphere, as strong earnings in the financial and transportations sectors led the way for a broad rally. All three major indices rose sharply on Wednesday, with the Dow gaining over 104 points. The market finished off its highs on low volume because of a rush of late selling.
What the market gaveth, it tooketh away on Thursday. As the yield on the 10-year Treasury bond reached 5.2% on Thursday, its highest level in over four years, investors renewed concerns over interest rates and a slowing economy. Stocks relinquished more than half of the previous day's gains and fell a bit more on Friday in choppy trading. Each of the three major indices closed down for the week.
While most anticipate at least a quarter-point hike in interest rates this week, the market will scrutinize the accompanying Fed policy statement -- considered a critical determinant regarding the current state of the heavens -- this Thursday. Other economic data scheduled for release include new home sales today, existing home sales and consumer confidence tomorrow, gross domestic product on Thursday, and personal income and consumer sentiment on Friday.
Corporations reporting earnings include Lennar and Walgreen today; Nike and Stride Rite tomorrow; Biomet, McCormick, Paychex, and Red Hat on Wednesday; followed by General Mills and Monsanto on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary:
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1. This index exhibited the most bipolar tendencies last week: (a). the Dow; (b). the Nasdaq; (c). the S&P 500.
2. True or False: The Nasdaq has fallen more than four times the number of days it has risen so far this month.
3. Companies reporting heavenly earnings included: (a). FedEx
4. True or False: Positive medical news regarding stents sent shares of Boston Scientific
5. Last week's deal news included the following: (a). Anadarko Petroleum
6. True or False: Cutting the crusts off peanut butter and jelly sandwiches can be a money maker.
7. Last week's housing market data showed: (a). builder confidence falling; (b). new home sales falling; (c). housing starts rising; (d). all of the above.
8. True or False: Tiffany
9. True or False: An American coin can be worth its weight in gold.
10. Astrologists may say that Fed Chairman Bernanke must wrestle most with (a). Earth; (b). Mars; (c). Neptune; (d). Pluto.
1. (c). After turning positive for the year on Wednesday, the S&P 500 fell back into negative territory for the year on Thursday.
2. True. The Nasdaq has only gained four out of this month's 17 trading days so far.
3. (a), (b), (c). FedEx shipped out a 27% increase in fourth-quarter earnings on Wednesday and raised its forecast for fiscal 2007, sending its shares up 5.1%. The same day, Morgan Stanley reported that its second-quarter earnings more than doubled, giving hopes that its turnaround efforts are succeeding and sending its stock up 4.3%. On Friday, software provider Oracle revealed on Friday a 27% increase in its fourth quarter income, sending its shares up 4%. Shares of Rite Aid didn't feel too good and fell 7.7% after the drugstore chain stated that its first-quarter earnings dropped more than 67%, thanks to store opening costs overpowering sales growth.
4. False. Shares of device maker Boston Scientific fell 2.6% Thursday, following a report by The Wall Street Journal that some prominent cardiology centers are cutting back on their use of drug-coated stents because of concerns over blood clots. Johnson & Johnson shares also declined 1%. The newspaper estimated that last year the two firms generated a total $5.3 billion in such product sales.
5. (a), (b), (c). Federated said on Tuesday that it intends to sell its Lord & Taylor store chain in the third quarter for approximately $1.2 billion to a private partnership. Shares of the department store operator moved up 0.1%. Oil and gas producer Anadarko announced separate deals on Friday, including the purchase of Western Gas Resources for $4.74 billion in cash, and the assumption of $560 million in debt and the acquisition of Kerr-McGee for $16.4 billion. Shares of Anadarko fell 7.21%, while Western Gas and Kerr-McGee each gushed upwards, 45.86% and 36.40%, respectively. Associated British Ports said on Friday that it had agreed to a revised takeover bid -- valued at approximately $5.17 billion -- from a consortium led by Goldman Sachs, whose shares slipped 0.26%. Meanwhile, Pier 1 said on Thursday that it is staying dockside, intent on examining succession issues before considering any potential divestitures. The struggling retailer closed down 5.6% for the week, after warning shareholders that choppy seas remain and time is needed before the company returns to shipshape profitability.
6. True. In "The Why Didn't I Think Of That" category, JM Smucker said on Tuesday that its fourth-quarter profit jumped 62%, citing improved sales in its consumer strategic business, including Uncrustables, its crustless peanut butter and jelly sandwiches. Meanwhile, pb&j's lunchtime pal, the fluffernutter, had a distressing week. A Massachusetts state senator announced plans to file legislation to ban schools from offering the gooey yet oh-so-tasty peanut butter and Marshmallow Fluff (manufactured by privately held Durkee-Mower) sandwich more than once a week.
7. (d). Weak data on the housing market came in the form of reports that the National Association of Home Builder's index of builder confidence fell to an 11-year low in June, and that its index for new home sales in June also dropped to its lowest level since April 1995. However, a Commerce Department report showed housing starts rising an unexpected 5% in May, following a 5.5% decline in the previous month. For the week, the Philadelphia Housing Sector Index constructed a 0.6% gain.
8. False. The jewlery retailer did not report any financial news last week, but undoubtedly cheered the lower Manhattan crowd when it announced Tuesday that it plans to open a 7,600 square-foot store at 37 Wall Street next fall, not far from its original location.
9. True. While numismatists may be familiar with rare coins fetching more than their face value, the U.S. Mint has just added to the pot. On Tuesday, the agency unveiled this country's first 24-karat gold coin. Featuring an American Buffalo, the $50 face value is symbolic. The proof will be priced at $800, while the bullion version will sell for the price of an ounce of gold plus a markup between 5% and 7.5%.
10. (c). No, it's not little green beings or even us mere Earthlings with whom Bernanke must come to terms. In an article entitled "Neptune and the New Fed Chairman," written by economic astrologer Robert Gover earlier this year on website StarIQ.com, the author names Neptune as the "prime astrological indicator of inflation." Any word on the Neptunian housing or job markets?
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!
FedEx is aselection of our Stock Advisor newsletter, and Johnson & Johnson is a pick from our Income Investor newsletter. The placement of the stars may not guide you, but our newsletters can.
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.