Equities last week performed less like an endearingly jittery June bride and more like Bridezilla.
Reflecting anxiety about the prospects of inflation or recession, the market began the week dismally. Stocks opened down on Monday amid additional concerns about Iran. The downward trend accelerated in the afternoon when Federal Reserve Chief Ben Bernanke pledged vigilance about fighting recent inflationary signs. Each of the major indexes suffered, with the Dow sinking nearly 200 points.
The doldrums continued Tuesday, spurred by concurring hawkish remarks from other Fed officials. Dropping below 11,000 for the first time since March, the Dow managed to pare more substantial losses and close just north of that level in late-hours trading.
There was no relief on Wednesday. Despite an early rally, the major indexes again finished in negative territory. This time, the Dow did close below 11,000, with heavy selling occurring in the final hour on the same concerns about higher rates and slower growth. Finally, on Thursday, stocks staged a dramatic turnaround in the afternoon, reversing yet another substantial drop, and closed marginally mixed. The market's change of heart reflected more of an influx of buying at lower prices than any real enthusiasm for current conditions.
Unable to hold on to earlier gains, equities ended a quiet session on Friday in negative territory, leaving investors brokenhearted from the market's worst weekly performance in more than a year.
Nerves will remain on edge this week because a slew of economic data will be released. Reports include the producer price index and retail sales on Tuesday, the consumer price index on Wednesday, industrial production on Thursday, and consumer sentiment on Friday.
Corporations announcing earnings include Lehman Brothers on Monday, Best Buy and Goldman Sachs on Tuesday, and Bear Stearns, KB Homes, Lions Gate, Omnivision, and Pier 1 on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary:
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1. These indexes reached new lows for the year: (a). the Dow; (b). the Nasdaq; or (c). the S&P 500.
2. True or false: Johnson & Johnson was the Dow's only winner last week.
3. Last week, bad news on the earnings front came from:
(a). Jos. A. Bank
4. True or false: IBM announced it would be pulling one-third of its investment from India because of the country's recent stock-market downturn.
5. Sectors performing better than most included:
(a). basic materials; (b). health care; (c). industrials; or (d). utilities.
6. True or false: Shareholders of General Motors showed their support for management at the company's annual meeting.
7. Last week's news concerning potential mergers included:
(a). BrookfieldProperties; (b). L-3 Communications; (c). McCormick; (d). The Knot; or (e)., New York Times.
8. True or false: If you thought you heard Alan Greenspan speaking and Martha Stewart's legal woes mentioned last week, you must have been experiencing your own little time warp.
9. The medical industry delivered healthy news for the following companies: (a). Cutera ; (b). Merck; (c). Peregrine Pharmaceuticals; (d). Pfizer; or (e). Pozen.
10. True or false: If you're wealthy, you're feeling pretty good about the stock market.
1. (b) and (c). On Friday, the Nasdaq dropped to its lowest level since last November and the S&P 500 reached its lowest close this year. The Dow still has a ways to go before it reaches its 2006 low, which was 10,667.39 on Jan. 20.
2. False. Oh, go ahead and give yourself half-credit if you knew that Johnson & Johnson was one of the Dow's weekly winners, rising 1.1%. The Dow's only other winner was Procter & Gamble, which finished up 0.9%.
3. (a), (c), and (d). Upscale men's clothier Jos. A. Banks reported a 13% drop in fiscal first-quarter income on Thursday, prompting its uptight shareholders to sell the company down 28.9%. Nortel wired in a wider than expected first-quarter loss on Tuesday. Although the telecommunications equipment maker expects accelerating growth the rest of the year, its shares slipped 2.6%. Pork company Smithfield's fourth-quarter profit declined nearly 99% because of a protein glut, leading its shares to a 3% belly flop on Thursday. Meanwhile, Martek's second-quarter profit jumped 84% on the strength of international infant formula sales and contract manufacturing sales. Shares of the nutritional oils manufacturer closed up 11% on Wednesday following the report. Late on Tuesday, discount retailer Target focused on its 2006 figures, saying it expects a slightly higher gross profit margin than in the previous year. Its shares increased 2.6% the following day.
4. False. Despite the recent faltering stock market in India, Big Blue announced a mammoth $6 billion investment in India over the next several years, tripling its current levels. The company intends to expand its customer support and software operations there, as well as to fund new service delivery and research centers. IBM shares rose 0.9% on Tuesday as the company celebrated its plans while on the subcontinent for its first analyst meeting ever outside the U.S.
5. (b) and (d). According to Dow Jones' U.S. sector indexes, health care rose 0.84% and utilities were up 1.11% in an otherwise dismal week in which basic materials lost 4.97% and industrials lost 2.45%.
6. False. Despite the board's objection, shareholders passed non-binding proposals on Tuesday to require GM directors to be elected by majority vote and to allow votes to be split unequally among nominees. Shares slipped 3% following the company's annual meeting, but rose 2.1% on Friday, after Delphi announced that it had reached an agreement to offer buyouts to hourly workers with the United Auto Workers union.
7. (a), (b), (c), and (d). Brookfield Properties announced Monday that, with The Blackstone Group, it will acquire TrizecProperties in a $4.8 billion deal creating one of North America's largest commercial property landlords. Shares of Brookfield rose 1%, while Trizec jumped 16.6%. Shares of L-3 rose 6.8% Wednesday, on speculation that the company might be acquired after its founder died last week. McCormick announced late Thursday that it will spice things up by acquiring Asian food provider Epicurean International for $97 million, causing a minimal increase in its shares the next day. Shares of bridal portal The Knot rose 7% on Tuesday, after the wedding portal announced that it agreed to walk down the aisle with WeddingChannel.com for $57.9 million in cash and 1.15 million shares. The New York Times made columns on Friday when Goldman Sachs downgraded it, sending shares down 1.58%.
8. False. Some of our favorite, or at least most notable, talking heads revisited us last Wednesday. Former Fed Chief Greenspan warned the Senate Foreign Relations Committee that higher oil prices may be starting to affect the U.S. economy, and Stewart commented on the Today show that she's close to settling the insider trading lawsuit the SEC filed against her, concerning her 2001 sale of ImClone shares.
9. (a), (b), and (c). Shares of laser provider Cutera rose 34% on Monday -- after it settled a patent lawsuit brought by Palomar Medical Technologies -- despite lowering its second-quarter and full-year guidance to account for the $22 million charge. Shares of Peregrine gained 2.8% on Wednesday after promising results were reported from a dosing trial of its hepatitis C treatment. Good news already seemed priced into Merck because its shares gained only a penny on Thursday after the Food and Drug Administration's approval of its cervical cancer vaccine. Pfizer slipped 1.4% for the week, during which lawsuits were filed concerning alleged side effects of its popular cholesterol-fighting drug, Lipitor. Pozen, a research and development company, suffered the most, with its shares falling 57% on Friday after the FDA requested additional safety data for its migraine headache treatment.
10. True. The AP reported last week that the 2006 U.S. Trust survey of wealthy Americans -- those with an adjusted gross income of more than $300,000 or a net worth greater than $5.9 million -- showed increased optimism about the stock market compared with last year. Even so, those surveyed expected future returns to be less rosy. Does anyone want to check back with them now after last week's market performance?
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!
You'll find Best Buy in Stock Advisor, Pfizer inInside Value,and Johnson & Johnson and Merck inIncome Investor. What type of investor are you? Talk stocks with other investors and our analysts when you give our newsletters a try.
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.