There WILL Be a Quiz: Weekly Cap Markets Recap

Buttonwood trees don't bear fruit. Except one.

Financial historians recount that the New York Stock Exchange can trace its origins to May 17, 1792, when a group of stockbrokers signed an agreement under a buttonwood tree on Wall Street. Probably the most exciting event on Wall Street last week came Wednesday, when the world's largest exchange rang the bell on its own floor as it heralded its historic initial public offering and commenced trading as the NYSE Group (NYSE:NYX). Shares opened at $67 and traded as high as $88 the following day. (For those of you wishing to ring your own bells, note that auction prices for the offering's commemorative memorabilia on eBay (NASDAQ:EBAY) currently surpass the stock's high-water mark.)

The overall equities markets did not fare as well for most of the week, with stocks trading blandly, affected by higher Treasury yields. However, February's solid but not overly robust employment data sent equities higher on Friday, as the market witnessed its strongest rally in weeks while ignoring interest rates and inflation concerns.

Whether or not the rally can be extended may hinge on this week's economic data. The most important numbers are Wednesday's release of the Fed's Beige Book -- its survey of the central bank districts, which is often looked to for short-term rate decisions -- and Thursday's Consumer Price Index data. Other reports include retail sales on Tuesday and housing starts on Thursday. While brokerage reports aren't usually market-moving, they are seen as a barometer of Wall Street's health; several brokerages, including Goldman Sachs (NYSE:GS), Lehman Brothers Holdings (NYSE:LEH), and Bear Stearns (NYSE:BSC), will report earnings throughout the week.

Stay market-tuned and Foolish!

Capital Markets Summary :

U.S.Equities

Commodities

Foolish Quiz:

1. Last week's major index movement showed:

__ (a). the Dow rising for the first time in three weeks.

__ (b). the Nasdaq losing for the first time in three weeks.

__ (c). the S&P dropping for the second week.

__ (d). none of the above.

2. Despite several intra-day breaches of the 11,000 level, the Dow managed to close above this marker the entire week.

___ True ___ False

3. Last week's stock market winners included:

__ (a). DreamWorks Animation (NYSE:DWA)

__ (b). Terex (NYSE:TEX)

__ (c). Univision Communications (NYSE:UVN)

__ (d). Google (NASDAQ:GOOG)

4. Sectors showing strength last week included:

__ (a). homebuilders

__ (b). automobiles

__ (c). utilities

__ (d). precious metals

5. Last Monday's announcement by AT&T (NYSE:T) of a $67 billion takeover offer for BellSouth (NYSE:BLS):

__ (a). would create the world's largest telecommunications company.

__ (b). sent AT&T's shares falling and BellSouth's rising.

__ (c). sent BellSouth's shares falling and AT&T's rising.

__ (d). helped boost the sector.

6. A jump in Treasury yields boosts housing stocks.

___ True ___ False

7. Last Wednesday's historic Big Board offering:

__ (a). settled the dispute among New York Attorney General Eliot Spitzer, Kenneth Langone, and Dick Grasso.

__ (b). saw shares of NYSE Group jump 25% on its first day of trading.

__ (c). rose, similar to action over the past year in other exchanges.

__ (d). rose, unlike action over the past year in other exchanges.

8. Last Friday's employment data raised expectations that the Federal Reserve will raise short-term rates at its next two meetings.

___ True ___ False

9. Highlights of Warren Buffett's annual letter to shareholders of Berkshire Hathaway (NYSE:BRK-A) included the following references:

__ (a). Mark Twain

__ (b). Sir Isaac Newton

__ (c). baseball player Hank Greenberg

__ (d). the Motley Fool

10. Alan Greenspan has agreed to be a contestant on next season's "Dancing with the Stars."

___ True ___ False

Answers
1. (a), (b), and (c). (Psst ... just think how easy it would be to get this answer right if you kept a binder of your favorite Motley Fool articles and these weekly quizzes -- that's how Mom does it.)

2. False. The Dow closed below 11,000 last Monday, Tuesday, and Thursday. The index hit its weekly low of 10,922.73 on Wednesday before managing to close above 11,005.74.

3. (c). This sad list of some of last week's losers reveals only one winner: Univision. The Spanish-language media conglomerate gained 1.3% for the week to close at $34.18, very near to its 52-week high of $35.65, benefiting from speculation of a takeover bid by a group of private equity investors and a key shareholder. DreamWorks suffered a not-so-dreamy 4.9% drop, partly due to statements that it doesn't expect "significant" earnings the first half of the year, and also because of a 65% fourth-quarter revenue decline which it blamed on Oscar-winning Wallace & Grommit. (Is it really fair to point fingers at a cheese-loving animated character and his dog?) Construction and mining equipment maker Terex dug its own hole and dropped 11.9%; it lowered its 2005 earnings projection and advised that its fourth-quarter results would be delayed due to financial restatements. Finally, remember when it was fun to talk about Google? Not lately. The stock dropped each day, ultimately shedding 10.8% for the week.

4. (b). The automobile sector revved up its engines, fueled by reports that General Motors (NYSE:GM) was nearing an agreement with auto parts supplier Delphi Corp., which might help reduce labor expenses at both companies. General Motors powered 12.6% higher for the week. Driving in the opposite direction, homebuilders and utilities lost ground as they felt the impact of higher fixed-income yields. Precious metals were also tarnished by the largest weekly drop in gold futures since August 1993.

5. (a), (b), and (d). The anticipated merger would create a combined company with a market capitalization of as much as $170 billion. Following the announcement, shares of AT&T fell 3.5%, and BellSouth's jumped 9.7% for the day. Investors often sell shares of an acquiring company and purchase shares of a target. Speculative chatter about other potential deals also helped boost the sector.

6. False. Higher yields generally hurt housing stocks, since mortgages become more expensive.

7. (b) and (c). Even as the NYSE Group closed its first calendar trading week up 11.3%, the battle over Dick Grasso's compensation lingers on. Putting that sideshow aside, the Big Board's successful debut will be followed closely by market participants, waiting to see if it will follow the meteoric rises of other exchanges and markets such as Chicago Mercantile Exchange Holdings (NYSE:CME), CBOT Holdings (NYSE:BOT), and rival Nasdaq Stock Market (NASDAQ:NDAQ). Listening for more bells to ring? Keep an ear open for global tie-ups to be among the next agenda items in this arena. Last Friday, the London Stock Exchange announced that it had rejected a $4.17 billion takeover offer from Nasdaq, which, like the NYSE Group, apparently covets global exchange consolidation.

8. True. The February data revealed the largest expansion in non-farm payrolls since November, showing strong employment numbers across all industries. This strength leads many economists to expect a quarter-of-a-percentage-point hike at the Fed's next meeting on March 27-28, a similar raise at the May meeting, and even a potential third raise in June. How does that floating-rate home equity line sound now?

9. (a), (b), and (c). Strange but true, and while we're on the subject, let's not forget the allusion to "a romantically challenged elderly couple." In his own typical folksy style, The Oracle from Omaha reported, among other things, that fourth-quarter net income rose 54%, and that his successor has been selected. Heaping criticism on hedge-fund and private-equity managers -- "hyper-Helpers" -- he also remarked that investors might be better off "if they just sat still and listened to no one." Sounds rather Foolish to us!

10. False. Mr. Greenspan may choose to put on his dancing shoes for his own enjoyment, but he certainly doesn't need to do that for extra bucks or celebrity. Penguin, a subsidiary of Pearson Plc (NYSE:PSO), displaying what some may deem its own irrational exuberance, just inked a deal with the former Fed chairman to set forth his memoirs for over $8 million, one of the largest advances in U.S. publishing history. Do you think we'll understand any of it?

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!

Dreamworks Animation and Google are Motley Fool Stock Advisor selections.

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, The New York Stock Exchange Group, and Google. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.