While the literary crowd gossiped last week about the latest alleged plagiarism, Wall Street endured its own sort of "he said/she said he said" story.
Our story begins once upon a time last Monday, with the Dow up about 40 points entering the final trading hour. CNBC anchor Maria Bartiromo then reported that Fed Chief Ben Bernanke had told her over the weekend that the media had misinterpreted his congressional testimony last week "as too lenient toward inflation." Within 10 minutes, traders' renewed fears of continued rate hikes sent the Dow sliding, and it ultimately closed down more than 24 points.
Tuesday's market action seemed to refute the previous afternoon's melodramatic sell-off, and stocks rallied to new highs on strong earnings despite rising oil prices. The story line changed Wednesday in mainly bland action when markets ignored a drop in oil prices and pulled back amid mixed earnings results and continued strong economic data.
Then, the plot turned again on Thursday as solid retail store earnings led the markets higher and oil continued to slide. The major indexes all closed higher, as many still awaited the release Friday of April employment numbers. The data did not disappoint, as payrolls revealed lower growth than projected, triggering a robust rally across market sectors. Equities closed at their best levels of the day, with the Dow just 145 points shy of its record high reached in January 2000.
Whether the market's happy ending will continue this week may well depend once again on our protagonist, the Federal Reserve. The Fed is widely expected to increase rates to 5% on Wednesday, but its accompanying policy statement will surely be parsed for signs of future action.
On an otherwise light economic calendar, trade and consumer sentiment data will be presented on Friday. Companies scheduled to report earnings include Chipotle Mexican Grill Monday, Baidu.com, Cisco Systems, and Walt Disney Tuesday, Federated Department Stores on Wednesday, and J.C. Penney on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary:
| U.S. Equities | 5/5/06 Close | Weekly Change (%) | YTD Change (%) |
|---|---|---|---|
| Dow | 11,577.74 | 1.9 | 8.0 |
| Nasdaq | 2,342.57 | 0.4 | 6.2 |
| S&P | 1,325.76 | 1.2 | 6.2 |
| Commodities: | Price ($) | Weekly Change (%) |
|---|---|---|
| Crude oil | 69.97 | -2.25 |
| Gold | 685.4 | 4.37 |
Foolish Quiz:
1. The major indexes rallied last week, and:
__ (a). the Dow reached its third-highest close ever.
__ (b). the S&P 500 reached its highest levels since 2001.
__ (c). the Nasdaq set record highs.
__ (d). all of the above.
2. All 30 Dow components participated in last Friday's market rally.
__ True __ False
3. Last week's earnings winners included:
__ (a). Archer Daniels Midland (NYSE:ADM)
__(b). Electronic Arts (NASDAQ:ERTS)
__ (c). Humana (NYSE:HUM)
__ (d). Tyson Foods (NYSE:TSN)
4. The following automaker reported the most robust growth in April:
__ (a). DaimlerChrysler
__ (b). Ford
__ (c). General Motors
__ (d). Honda
__(e). Toyota
5. This retailer was one of the few not to ring up much business at the register last month:
__ (a). American Eagle Outfitters
__ (b). Gap
__ (c). Target
__ (d). Wal-Mart
6. If you had been investing in satellite radio, you would have fared better last week owning shares of:
__ (a). Sirius __ (b.) XM Satellite
7. In response to Friday's employment report:
__ (a). stocks rose and bonds fell
__ (b). stocks fell and bonds rose
__ (c). both stocks and bonds rose
__ (d). both stocks and bonds fell
8. Shares of the first silver exchange-traded fund traded lower during the week than their opening-day close.
__ True __ False
9. If you watched the Kentucky Derby over the weekend, you may also have considered investing in:
__ (a). BerkshireHathaway
__ (b). Chicago Mercantile Exchange
__ (c). Pier One
__ (d). Yum! Brands
10. You might enjoy more success in the market if you suffer from a neurological impairment.
__ True __ False
Answers:
1. (a), (b). Only Nasdaq did not set records, but the index was no slouch, either, as it ended the week on strength from transport and biotech components, as well as tech.
2. False. Procter & Gamble (NYSE:PG) had the dubious distinction of being the lone one to close in negative territory on Friday, slipping 0.23% following a disappointing earnings release.
3. (a). Agricultural behemoth Archer Daniels Midland jumped 10% Tuesday after it reported a 29% increase in third-quarter earnings, fueled by greater demand for alternative fuel products. Shares reached a record high of $43.61 on Wednesday before pulling back 7.7% on Thursday when the federal government announced the possibility of removing the tariff on imported ethanol. Software provider Electronic Arts lost 11% Thursday after it announced a fourth-quarter loss and issued a disappointing earnings outlook. Shares of insurer Humana dropped 0.5% Monday after the company reported a 22% decline in first-quarter earnings, attributed in part to costs associated with Medicare's new prescription drug plans. Despite Tyson Foods reporting a $127 million second-quarter loss, its shares rose 0.8% Monday. While company officials complained about an oversupply of protein, plant closings, and fuel costs, analysts approved of the company's efforts.
4. (e). Notwithstanding allegations of sexual harassment involving the head of U.S. sales for Toyota that surfaced Monday, it was a good week for the Japanese automaker. Data for auto and truck sales in April was released Tuesday and showed Toyota ranking third in U.S. auto sales for the first time in which data for both its Lexus division and DaimlerChrysler's Mercedes-Benz division were included. Toyota's sales were up 8.5%, while DaimlerChrysler slipped 6.2%, Ford lost 7%, General Motors slipped 10.7%, and Honda's grew 6.5%.
5. (b). Despite retailers posting strong April sales data, same-store sales at the Gap fell 3%, while business was up 19% at American Eagle, 10% at Target, and 6.8% at Wal-Mart.
6. (a). Sirius stock rose 1.1% last week on the strength of rising subscriber numbers, as the company added almost 200,000 more customers in the first quarter than rival XM Satellite, which fell 11.4%.
7. (c). OK, maybe this was a little too easy, and next time we'll have to ask about the dollar. Bond prices rallied following the jobs report, with the 10-year Treasury gaining 10/32, sending its yield to 5.11%.
8. True. During one point on Wednesday, shares of Barclay's iShares Silver Trust declined because of speculative futures selling and hit a low of $134.13, below its closing price of $138.12 on April 28 . For its first full week of trading, shares rose 1.3%.
9. (d). Really, who are we to say where your mind may have wandered, but if you started thinking about fried chicken, tacos, or pizza, then Yum!'s strategy may have hit pay dirt. The Lousiville-based corporate owner of Kentucky Fried Chicken, Taco Bell, and Pizza Hut sponsored the horse race this year in a bid to attract new investors. If your mind did stray to Berkshire Hathaway, perhaps you, too, were wondering about Warren Buffett's next acquisition, or if it strayed to the mercantile exchange, then you might have been considering its plans announced Friday for a joint venture with Reuters to trade more currency derivatives. If you thought about Pier 1, then let's hope that you took your mind off the retailer's ever-declining same-store sales figures by enjoying another sip of your mint julep.
10. True. The Associated Press reported that research conducted last year by a Carnegie Mellon professor found that people suffering from neurological diseases that impaired their emotional responses fared better in an investment experiment than those who did not. Don't let your emotions get the best of you. Check out the Fool's newsletters for investment advice.
Scoring:
8-10 correct: Foolishly impressive.
6-7 correct: Almost Foolish.
1-5 correct: OK, but just barely.
0 correct: Keep reading the Fool and watch your scores improve!
Fool contributor S.J. Caplan is a former vice president and assistant general counsel of Goldman Sachs and a former vice president and derivative finance specialist at Lehman Brothers. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
