Baseball fans eagerly awaited last week's season opening and were elated by week's end if they happened to be fans of the Detroit Tigers or Milwaukee Brewers. Investors, on the other hand, anxiously awaited Friday's employment report and had little to cheer about in the market's reaction by the time Wall Street's trading games finished for the week.
Stocks bounced around most of the week in choppy action ahead of the Labor Department's release of last month's employment data. The data showed healthy growth, with an increase of 211,000 payroll jobs, the dropping of the unemployment rate by 1% to 4.7%, and wage growth of 0.2%. Equities swung for the fences, initially trading up on speculation that the figures were not so strong as to raise inflation concerns.
But the stock market soon ran for cover, once bonds began to decline on fears that a tightening labor market will lead to at least two more Fed quarter-point interest rate hikes. Rising commodity prices, spiked in particular by multiyear highs set the previous day by precious metals as gold broke the $600 mark and silver closed above $12, also added to concern over the Fed's future play. Stocks ultimately struck out on Friday, with the Dow and Nasdaq each falling 0.9%, and the S&P 500 declining 1%. By the time the dust settled, most of the week's earlier gains had been wiped from the scoreboard in the market's worst performance since February.
Corporate earnings will be the name of the game this holiday-shortened week, as Alcoa (NYSE:AA) throws the opening ball of the reporting season today. Among the companies following close behind will be Advanced Micro Devices (NYSE:AMD) on Wednesday, and General Electric (NYSE:GE) on Thursday. U.S. markets will be closed on Friday.
Stay tuned in and Foolish!
Capital markets summary
U.S. Equities
| 4-7-06 Close | Weekly Change |
YTD Change | |
|---|---|---|---|
| Dow | 11,120.04 | 0.1 | 5.2 |
| Nasdaq | 2,339.02 | 0 | 4.9 |
| S&P | 1,295.50 | 0.1 | 4.4 |
Commodities
| Price ($) |
Weekly | |
|---|---|---|
| Crude Oil | 67.43 | 1.63 |
| Gold | 592.70 | 1.58 |
Foolish Quiz:
1. Which following index achieved its first weekly gain in three weeks?
__ (a). the Dow
__ (b). the Nasdaq
__ (c). the S&P 500
__ (d). none of the above
2. The Nasdaq 100 Index closed at a new five-year high last week.
__ True __ False
3. Last week's scoring stocks included:
__ (a). Apple Computer (NASDAQ:AAPL)
__ (b). St.Jude Medical (NYSE:STJ)
__ (c). 3M (NYSE:MMM)
__ (d). Merck (NYSE:MRK)
4. Stocks striking out in the retail sector last week included:
__ (a). bebe stores (NASDAQ:BEBE)
__ (b). Claire's Stores (NYSE:CLE)
__ (c). Nordstrom (NYSE:JWN)
__ (d). Wal-Mart (NYSE:WMT)
5. Last week's merger Monday news involved the following players:
__ (a). Lucent Technologies (NYSE:LU)
__ (b). RadioShack (NYSE:RSH)
__ (c). Verizon Communications (NYSE:VZ)
__ (d). Ameristar Casinos (NASDAQ:ASCA)
6. The Dow's historically best performing month is April.
__ True __ False
7. The March auto sales report showed U.S. sales rising at:
__ (a). General Motors (NYSE:GM)
__ (b). Ford Motor (NYSE:F)
__ (c). ToyotaMotor (NYSE:TM)
__ (d). none of the above
8. Sean "Diddy" Combs rang the bell on the floor of the New York Stock Exchange last Monday.
__ True __ False
9. Sectors feeling pain following Friday's release of the March employment data included:
__ (a). utilities
__ (b). real estate investment trusts
__ (c). banks
__ (d). all of the above
10. A U.S. government savings bond offers a higher growth rate over periods of time as long as 18 years than stocks.
__ True ___ False
Answers
1. (c). The S&P 500's modest gain of 0.1% last week enabled it to break out of a three-week losing streak.
2. False. Although the Nasdaq Composite reached a new five-year high on Thursday when it closed at 2,361.17, the Nasdaq 100 Index has not topped its high even of this year, set in January. The capitalization-weighted index of the 100 largest and most active non-financial, domestic Nasdaq stocks did, however, gain 1.1% for the week.
3. (a), (c). Apple hit a home run last week, jumping 11.3% for the week after the company released its new Boot Camp technology, which enables Macintosh computers to run Windows XP. 3M also performed well, rising 7.1%, subsequent to hiking its first-quarter earnings projections. However, St. Jude Medical slid 9.7% by the weekend after it cut its first-quarter sales and earning projections because of disappointing defibrillator sales. Merck suffered a 2.2% decline after a jury found the company liable for a consumer's heart attack because of failure to warn of Vioxx's safety concerns and awarded the plaintiff $4.5 million.
4. (b), (d). March same-store sales turned out to be a mixed bag. Both Claire's Stores and Wal-Mart went on sale as they disappointed investors. Claire's sales fell 3%, significantly below its expected 1.7% increase, sending its shares down 5.7% by Friday's close. Wal-Mart lost 2.6% for the week after reporting a 1.3% rise, its smallest increase in two years. For the week, shares of bebe Stores rose 7.7%, reflecting its 4.1% sales increase, while Nordstrom basked in its 4.3% sales gain and luxuriated in a 1.9% share gain.
5. (a), (c), (d). The acquisition of Lucent by French telecom equipment maker Alcatel (NYSE:ALA) in a $13.4 billion stock swap announced last Sunday sent shares of Lucent up 1% on Monday. The combined new company is expected to have annual sales of $25 billion and an 18% share of the global market. Shares of Verizon rose 1.1% Monday after the company announced its $3.7 billion agreement to sell Caribbean and Latin American telecommunications operations to two Mexican companies. Ameristar Casinos dropped 6.9% following its $1.51 billion offer for competitor Aztar (NYSE:AZR). RadioShack was not transmitting offers when it fell 4.2% Monday and 4.7% for the week following a downgrade from "overweight" to "neutral weight" by Prudential Equity Group. The company's shares hit a fresh 52-week low on Friday, closing at $18.33.
6. True. According to The Stock Trader's Almanac, based on data from 1950 to the present, the Dow's best monthly performance occurs in April. Equities usually receive a boost from last-minute contributions to IRAs prior to April 15. But beware -- the index has dropped four of the last six Aprils.
7. (c). Only Toyota drove ahead as its U.S. sales revved up 7%, pushing its shares up 1.3% for the day. General Motors auto sales fell 14%, and shares dropped 5.3% on both its last-month figures and same-day announcement of its approximate $14 billion agreement to sell a 51% stake in its financing arm to Cerberus Capital Management. Sales at Ford also stalled for the second consecutive month, falling 4.6% and sending its shares down 2.4%.
8. False. The only bell Mr. Combs rang was the tardy one as he missed his scheduled appointment to ring the Big Board's opening bell alongside executives from Federated Department Stores (NYSE:FD) and Estee Lauder (NYSE:EL) to celebrate his new fragrance, "Unforgivable."
9. (d). Each of these sectors is particularly interest rate-sensitive, either because of the prospect of rate hikes hurting demand, such as with real estate investment trusts and banks, or because of competition with stocks for greater yield, as in the case of utilities. The yield on the 10-year Treasury note closed at 4.96% on Friday, its highest level since June 2002.
10. False. However, your local high school student believes otherwise. According to the JumpStart Coalition for Financial Literacy, its 2006 Survey of Financial Literacy Among High School Students revealed that 44.8% believed savings bonds offered the highest growth rate, compared with 34.8% selecting savings accounts, 6.3% picking checking accounts, and only 14.2% choosing the correct answer -- stocks. Congress has declared April as Financial Literacy for Youth Month. Consider sharing your Foolishness with a student!
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!
3M is a Motley Fool Inside Value pick. Merck is a Motley Fool Income Investor pick. bebe is a Motley Fool Stock Advisor pick. Ameristar is a Motley Fool Hidden Gems pick. Take the newsletter that best fits your investing style for a 30-day free spin.
Fool contributor S. J. Caplan is a former vice president and assistant general counsel of Goldman Sachs and 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.
