After receiving news of lower-than-expected jobless claims, higher-than-expected job growth, and interest-rate cuts by the European Central Bank to 0.5%, the U.S. markets rallied this past week. The Dow Jones Industrial Average (DJINDICES:^DJI) managed to gain 261 points, or 1.77%, and now sits just a few points below the 15,000 milestone at 14,973. The other major indexes actually performed better, as the S&P 500 rose 2.03% and broke the 1,600 barrier, as it now rests at 1,614. The Nasdaq increased by 3.03%, or 99 points, and sits at 3,378.
Before we hit the Dow losers, the index's big winner of the week was Microsoft (NASDAQ:MSFT). On Tuesday, shares rose 1.5% after an analyst at Bernstein Research released a report indicating that investors and other analysts may have undervalued Microsoft's cloud computing business. The company's executive recent announced that the unit has produced more than $1 billion in revenue, a number the Bernstein analyst says is way over what most have been estimating. This means that a number of ratings and price targets are probably lower than where they should be.
The big losers
Both of the Dow's big pharmaceutical stocks fell this week, and Merck became the biggest Dow loser after shares fell 4.6% over the past five trading days, while Pfizer (NYSE:PFE) fell 3.75%. Both companies announced earnings during the week, and neither company gave investors the results they wanted to see for the first quarter of the year.
While Merck did beat expectations on revenue, the company missed on earnings. But what really sent investors running was that the company revised its full-year earnings forecast lower by 15%. Shares fell 2.78% on Wednesday alone after earnings and the revised forecast were announced.
I mentioned last week, when shares, of Pfizer fell 3.12% that Bristol-Myers Squibb had reported poor quarterly results, and that was causing shares of other drug manufacturers to decline. Well, this week, the same thing happened. After Pfizer announced less-than-appealing results on Tuesday, we saw the whole industry head lower. Pfizer reported that revenue fell by 9%, while adjusted income dropped 10% during the quarter. But the main reason Merck tanked slightly more the Pfizer this week was that Merck lowered guidance and Pfizer didn't.
Shares of Verizon slid lower by 1.77% this past week. The stock fell 2.8% on Wednesday on very little news but high volume. There's been a lot of speculation over the past few weeks about a possible deal in which Verizon would buy the 45% stake that Vodafone owns of the Verizon Wireless joint venture. This has led a number of analysts to estimate what the buyout price would have to be to make sense for both companies and how Verizon would receive the funds to pull the deal off. Estimated prices range from $100 billion to as high as $130 billion, and these numbers may be scaring off investors. If the deal would go through, Verizon might need to trim its dividend for some time while it pays off the debt, or it might need to cut the payout altogether. While in the long run Verizon would probably be a stronger, better company if it pushed Vodafone out of the equation, in the short term Verizon may face some serious headwinds because of the size of debt the company would now hold.
Lastly, shares of both the big Dow banks fell lower this past week. JPMorgan Chase (NYSE:JPM) lost 2.68%, while Bank of America (NYSE:BAC) dropped 1.45%. JPMorgan had a slightly worse week as the Federal Energy Regulatory Commission announced that it was investigating the bank on possible energy market manipulation. This is just another regulatory issue the bank has had over the past few months, and it's another black mark on Jamie Dimon's tenure.
Furthermore, shares of both the banks fell slightly after the Federal Reserve announced that it will be keeping interest rates low. This move hurts the banks because is squeezes the spread banks are paying for money and what they can charge for it. When rates move higher, the banks will probably experience a wider spread and therefore make a better return on their own investment.
Other Dow losers this week included UnitedHealth Group, down 0.94%.