Ten years after Alan Greenspan's iconic "irrational exuberance" comment, Wall Street waited for last Friday's release of the November employment report and then responded rationally and cheerfully.
Giddy from merger activity, stocks rose broadly on Monday. The Dow climbed more than 89 points, and the Nasdaq gained more than 35 points. On Tuesday, benign inflationary data helped stocks continue their ascent toward record heights.
The rally halted on Wednesday as stocks closed in negative territory on a slow economic news day. Stocks lost further ground on Thursday, when investors took money off the table before the next day's employment numbers.
On Friday, the employment data provided a healthy view of the economy. Stocks rose modestly, counterbalanced by the notion that the Fed will have little reason to cut rates in the near future.
The early focus this week will be on the FOMC meeting and announcement regarding interest rates set for tomorrow afternoon, which is expected to leave rates unchanged. Economic data scheduled for release includes wholesale trade today, international trade tomorrow, retail sales and business inventories on Wednesday, import and export prices on Thursday, followed by the consumer price index and industrial production figures on Friday.
Corporations releasing earnings include Analogic today; Best Buy, Dollar General, and Goldman Sachs tomorrow; and Adobe Systems, Bear Stearns, Costco, Pier 1, and Winnebago on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
12/8/06 Close |
Weekly Change (%) |
YTD Change (%) |
|
|---|---|---|---|
|
Dow |
12,307.49 |
0.9 |
14.8 |
|
Nasdaq |
2,437.36 |
1.0 |
10.5 |
|
S&P |
1,409.84 |
0.8 |
12.7 |
Commodities
|
Price ($) |
Weekly Change (%) |
|
|---|---|---|
|
Crude oil |
62.09 |
(2.47) |
|
Gold |
629.30 |
(3.33) |
Foolish Quiz
1. True or false: Pfizer
2. Which stock contributed the most to the S&P 500's advance on Friday: Bank of America
3. True or false: Toll Brothers
4. Investors in this supermarket chain rang up more price appreciation on the day of its earnings release: Kroger
5. True or false: Wall Street applauded the announced merger between Bank of New York and Mellon Financial.
6. Which left a better taste for investors last week: chocolate bars or chicken wraps?
7. Which did Ford investors want more: stocks or bonds?
8. True or false: An executive shake-up at Yahoo! caused shareholder exuberance.
9. Yum! Brands announced:
(a) better breakfasts.
(b) fatter dividends.
(c) fewer green onions.
(d) all of the above.
10. True or false: The federal funds rate remains unchanged since the time of Greenspan's "irrational exuberance" comment.
Answers
1. False. Shares of Pfizer fell 10.6% on Monday, when the company announced that it was halting development of a key drug in its pipeline, but it regained some strength later in the week after a Canadian court blocked the marketing of a generic competitor to the company's cholesterol-fighting drug Lipitor. For the week, shares fell 9.7 % and closed at $25.17, still above its 52-week low of $20.27.
2. Citigroup. Shares of Citigroup rose 2.25% on Friday to a 52-week high of $51.85, amid various rumors including a management shakeup and possible reorganization plans. Shares of Bank of America went the other direction; they fell 1.58% as rumors circulated that the company was sniffing out U.K.-based Barclays as an expansion target.
3. True. Despite posting a 44% decline in fourth-quarter profits on Tuesday and forecasting a decline as great as 62% for the next fiscal year, Toll Brothers, citing the metro Washington, D.C. area, said the housing market may be bottoming in certain markets. Does that qualify as "irrational exuberance"?
4. Kroger. Shares jumped 5.2% on Tuesday after the company reported a 16% increase in third-quarter profits and boosted its outlook for the year. Standing next in line were Pathmark shareholders, who rang up a 1.1% increase in share price on Thursday, when the company reported a narrowing third-quarter loss because of cost-cutting and marketing initiatives.
5. True. Monday's $16.5 billion stock-swap merger announcement sent shares of Bank of New York and Mellon up 12% and 6.8%, respectively. The news, which would create the largest custodial bank, took the spotlight off Pfizer's ills and sent shares of peers higher on hopes of further marriages.
6. Chicken wraps. Shares of McDonald's climbed a tasty 4% last week following the company's announcement on Friday that November same-store sales grew 5.1%. Those sales were aided by strong chicken-wrap sales and late-night and breakfast demand. Shareholders of Hershey faced a 2.4% meltdown as the company slashed its earnings estimates for the year.
7. Bonds. Ford's confirmation late Wednesday that it had increased its convertible bond offering 50% to $4.5 billion because of strong demand clearly did nothing to put the brakes on the stock's slide. Shares skidded 10.1% for the week, marking eight consecutive days of declines.
8. False. Despite a top-level management reorganization announced by late Tuesday, aimed at making the company more competitive with Google, shares slipped 2.1% the next day. No exuberance, or even a "yee-haw," for Yahoo!.
9. (d). Yum Brands lost 2% in an event-filled week. After reports of an e. coli outbreak linked to several of its Taco Bell restaurants, the company announced that it will remove green onions from its locations. While Taco Bell is also testing a breakfast menu, shareholders' palates were better pleased by the company's announcement that it will double its cash dividend.
10. Trick question! Although the Fed funds rate stands at 5.25%, the same as at the time of Greenspan's speech, the Fed has actually tinkered with the rate 40 times since then. The more things change, the more they stay the same.
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!
Pfizer is a Motley Fool Inside Value pick. Yahoo!, Costco, and Best Buy are Motley Fool Stock Advisor selections. Bank of America is a Motley Fool Income Investor pick. 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 Google. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
