One didn't have to be a Wall Street executive to enjoy an early holiday bonus from equities last week.
Merger news helped stocks close higher Monday in thin trading ahead of the Federal Reserve meeting. After an early drop on Tuesday, stocks regained some strength following the Fed's announcement that left rates unchanged. But they still closed slightly lower.
On Wednesday, aviation consolidation and strong retail sales numbers boosted stocks into positive territory. Despite a rise in oil prices, a streak of strong investment banking earnings sent the Dow over 12,400 for the first time on Thursday as it closed up more than 99 points.
Friday's release of the closely watched consumer price index brought more cheers because inflation was not found lurking in the rates, which were unchanged from the previous month. Stocks continued their ascent, with the Dow closing at a new high.
This week, economic numbers about housing starts, the producer price index, and investor confidence will be released Tuesday; gross domestic product and leading indicators on Thursday; and durable goods, personal income, and consumer sentiment on Friday.
Corporations scheduled to release earnings include FuelCell Energy and Hovnanian Monday; Circuit City, Darden Restaurants, Morgan Stanley, Palm, and Scholastic Tuesday; Bed Bath & Beyond, Biomet, Jabil Circuit, and Nike on Wednesday; and American Greetings, Red Hat, Research In Motion, Rite Aid, and Solectron on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
12/15 Close |
Weekly Change (%) |
YTD Change (%) | |
|---|---|---|---|
|
Dow |
12,455.52 |
1.2 |
16.2 |
|
Nasdaq |
2,457.20 |
0.8 |
11.4 |
|
S&P |
1,427.09 |
1.4 |
14.3 |
Commodities
|
Price ($) |
Weekly Change (%) | |
|---|---|---|
|
Crude oil |
63.43 |
2.16 |
|
Gold |
619.00 |
-1.64 |
Foolish Quiz
1. True or false: Goldilocks was quoted on Wall Street last week.
2. True or false: If you experienced a power surge on Friday, you could blame General Electric (NYSE:GE).
3. Which investment bank did not set a record for quarterly earnings?
(a) Bear Stearns (NYSE:BSC)
(b) Goldman Sachs (NYSE:GS)
(c) Lehman Brothers (NYSE:LEH)
4. True or false: Shares of the brokerage that set the record for the best quarter in Wall Street history also reached a new 52-week high the day the brokerage reported earnings.
5. Which announcement by Citigroup (NYSE:C) increased its share price more?
(a) a management reorganization
(b) a greater focus on international deals
(c) neither
6. True or false: Shares of Sabre Holdings (NYSE:TSG), the parent company of Travelocity, rose after the company agreed to merge with Midwest Air Group (AMEX:MEH).
7. Shares of this airline soared above the others because of speculation about a merger:
(a) Continental
(b) Northwest
(c) UAL
8. Which big-box purveyor rang up better earnings: Best Buy or Costco?
9. From which would an investor have reaped larger gains last week: pants or planes?
10. About how many shares of Morgan Stanley stock equals this year's reported bonus for its CEO?
(a) 500
(b) 50,000
(c) 500,000
Answers
1. True. Or perhaps we should have said Goldilocks was cited in view of last week's data, which many pundits claimed revealed a not too hot and not too cold economy.
2. True. GE led the Dow higher on Friday when its shares rose an electrifying 3.2% -- marking its largest single-day advance in almost three years -- due to CEO Jeffrey Immelt forecasting a profit increase of up to 13% next year based on Asian sales.
3. (c). Although all three investment banks reported strong fourth-quarter earnings, Lehman's 22% rise in net income met expectations, but a decline in merger advisory fees kept it from setting a record. Bear Stearns reported a 38% increase, while Goldman's 93% increase came primarily from trading and investing.
4. False. Although Goldman set a Wall Street earnings record, its shares slipped 0.8% on Wednesday amid doubt that its growth could continue and expectations for an even wider margin. Surely, one can't please all the people all the time, but those inside 85 Broad Street must be quite giddy about their bonuses, which if the rumors are true would make one dizzy just to contemplate.
5. (b). Citigroup's naming of a new operating chief on Tuesday didn't inspire investors and shares shed 1.2%, but they rose 1.5% on Thursday when the CEO said the bank will focus on international opportunities over domestic acquisitions. For the week, shares increased 4.3%.
6. False. Shares of travel reservations provider Sabre Holdings rose 12.6% on news that Texas Pacific Group and Silver Lake Partners are buying it for $5 billion. Not to be stranded at the gate, shares of Midwest Air were up 22% on Wednesday after AirTran Holdings offered to purchase the company for $290 million.
7. (b) Shares of Northwest increased 16.3% on Monday on news that it had hired an advisor to help it evaluate strategic alternatives, including a possible merger. On Wednesday, chatter about a possible merger between Continental and United Airlines parent UAL lifted their shares 4.4% and 5%, respectively.
8. Costco. On Thursday, shares of Costco rose 1.8% after the company reported better-than-expected 10% growth in fiscal first-quarter income. Shares of Best Buy didn't fare so well on Tuesday when it unpacked a disappointing 8.7% increase in third-quarter earnings; the stock fell 4.9%.
9. Pants. The S&P Retail Index won by a stitch, with a 1.4% increase, while the Amex Airline Index finished 1.3% higher for the week.
10. (c). Don't be stingy with those zeros. It would take about 500,000 shares at Friday's closing price of $79.26 to equal Morgan Stanley CEO John Mack's bonus. He will receive $40 million in stock and options for his 2006 performance, the largest awarded to a Wall Street executive -- yet. (Wait until the regulatory filings about what the folks at Goldman will rake in.) Shares of the firm have risen about 40% this year and it will report earnings Tuesday. Anyone want to doubt that they're pretty darn good?
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!
Bed Bath & Beyond is a Motley Fool Inside Value pick. Best Buy, Costco, and Palm are Stock Advisor selections. 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 a former vice president and derivatives finance specialist at Lehman Brothers, owns shares of Goldman Sachs. She serves as an arbitrator for the New York Stock Exchange and the National Association of Securities Dealers. The Fool has a disclosure policy.
