Equities performed worse last week than any American Idol cast-off yet. Even as commodities endured their largest weekly drop in a quarter century, Wall Street belted out the inflationary blues, pushing each major index soundly into the red for the week.
After a confused session with stocks vacillating back and forth amid sinking commodity prices, indices closed mixed on Monday. The next day brought harmony as the indices each closed down modestly, despite reports indicating benign wholesale inflation and a slowing housing market. Stocks made the ugliest sounds of all on Wednesday. A morning report on consumer inflation fanned fears of further rate hikes, sending stocks cascading to one of their poorest sessions in three years. The dissonance continued Thursday, despite the market mostly holding its ground until the final hour of trading, when stocks slumped again. Friday's action teetered all day between high and low notes, before concluding on a positive tone for the Dow, Nasdaq, and S&P 500.
Whether this week will bring sweeter sounds may depend on the Commerce Department's preliminary report on first-quarter gross domestic product to be released on Thursday, followed by personal income and consumer sentiment data on Friday. The health of the housing market will be gauged by April figures for new home sales on Wednesday and existing home sales on Thursday.
Companies reporting earnings include Campbell Soup and Lowe's today; Borders, Medtronic, and Toll Brothers tomorrow; and Hormel Foods on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary:
U.S. Equities
| 5-19-06 Close | Weekly Change (%) | YTD Change (%) | |
|---|---|---|---|
| Dow | 11,144.06 | (2.1) | 4 |
| Nasdaq | 2,193.08 | (2.2) | (0.5) |
| S&P | 1,267.03 | (1.9) | 1.5 |
Commodities
| Price ($) | Weekly Change (%) | |
|---|---|---|
| Crude Oil | 68.53 | (4.87) |
| Gold | 657.7 | (7.4) |
Foolish Quiz:
1. Last Wednesday's market decline marked the following:
__ (a). the Dow's worst point-drop of the year.
__ (b). the Nasdaq's seventh consecutive daily decline.
__ (c). the S&P 500's worst day in four months.
__ (d). all of the above.
2. All of the Dow's 30 components declined during Wednesday's plunge.
__ True __ False
3. Last week's retail earnings winners included:
__ (a). Ann Taylor (NYSE:ANN)
__ (b). Gap (NYSE:GPS)
__ (c). Sears Holdings (NASDAQ:SHLD)
__ (d). Target (NYSE:TGT)
__ (e). Wal-Mart (NYSE:WMT)
4. Potential deals surfacing last week included those involving:
__ (a). AstraZeneca
__ (b). Dell
__ (c). First AvenueNetworks
__ (d). Vodafone
5. Companies facing criminal probes of their stock option grants include:
__ (a). AmericanTower
__ (b). Caremark Rx
__ (c). UnitedHealth
__ (d). Vitesse
6. Gold tarnished more last week than any of the precious metals.
__ True __ False
7. The following companies settled legal disputes:
__ (a). Boeing
__ (b). Symantec
__ (c). Tenet Healthcare
__ (d). XM Satellite Radio
8. BellSouth may want to cancel its subscription to USAToday.
__ True __ False
9. The following events transpired last week involving The New York Stock Exchange:
__ (a). Rumors surfaced of progress with a potential Euronext merger.
__ (b). Will & Grace rang the bell on Tuesday.
__ (c). The exchange celebrated its 214th birthday on Wednesday.
__ (d). All of the above.
10. Expect to spend about the same for one share of Burger King as for seven Whoppers and some onion rings.
__ True __ False
Answers:
1. (d). Sad but true. The Dow sank 214.28 points, or 1.9%, while the Nasdaq fell 1.5% as it continued its losing streak, and the S&P 500 dropped 1.7%.
2. False. Hewlett-Packard (NYSE:HP) staged its own lonely rally Wednesday, climbing 3.2% on the strength of higher than expected earnings. (See HP Revs Up the Horsepower.)
3. (a), (c), and (e). Retailers posted respectable earnings in general last week. Among the strongest, Ann Taylor's first-quarter profit more than doubled and the company raised its full-year forecast. The company's shares rose 2.9% on Friday. Despite uninspiring same-store sales figures, Sears reported a higher-than-expected first-quarter profit on Thursday, propelling its stock up 18%. Shares of Wal-Mart rose 1.4% Tuesday when it released its earnings, showing a first-quarter profit increase of 6.3%. Competitor Target did not perform as well. The retailer's shares dropped 4% Monday after reporting a 12% rise in first-quarter profits, which narrowly missed Wall Street's expectations. Although first-quarter profit fell 17% at Gap, its shares nevertheless gained 3.1% Friday as the company projected improvement the second half of the year. (See Wal-Mart Looking Sharp and Target Hits the Mark: Fool by Numbers.)
4. (a), (c), and (d). In a relatively quiet week concerning merger activity, AstraZeneca sent shares of Cambridge Antibody zooming 62.4% when it announced Monday that it will pay over $1 billion to acquire the outstanding shares of Cambridge Antibody. The pharmaceutical company's own shares lost 0.4%. Shares of First Avenue Networks surged 40% Monday when it disclosed its agreement to a $1.5 billion merger with network operator FiberTower. Vodafone also gained 0.7% the same day amid unofficial British news reports that it may sell its position in Verizon Wireless to Verizon Communications for up to $48 billion. Meanwhile, in the face of lower first-quarter earnings, Dell made news of a different kind by announcing late Thursday that it will end its exclusive relationship with Intel and begin buying chips from Advanced Micro Devices. Shares of Dell advanced 2.6% on Friday. (See AstraZeneca's Peer Pressure Purchase.)
5. (b), (c), and (d). On Thursday federal prosecutors announced the opening of criminal probes into possible stock option abuses by Affiliated Computer Services, Caremark, Vitesse, and SafeNet. On Wednesday UnitedHealth also said that it had received a subpoena from the Manhattan prosecutor. American Tower has only received a letter of informal inquiry by the SEC. The SEC is currently examining approximately 20 companies to investigate whether improper backdating of option grants occurred.
6. False. While gold fell 7.6% last week, copper oxidized 10%.
7. (a) and (c). Boeing dropped 1.3% for the day when it reported Monday that it will pay over $600 million to settle criminal and civil investigations into its bidding and hiring practices in the early 2000s. Shares of Tenet Healthcare rose 6.1% when it announced Wednesday that it agreed to pay $21 million and close or sell a California hospital to settle its dispute with the federal government over alleged kickbacks. Symantec is just beginning its legal battles with Microsoft, as it brought suit on Thursday, claiming Mr. Softy's improper use of its Veritas storage technology in its operating system software. Shares of Symantec fell 0.5% for the day, while Microsoft inched up 0.4%. XM Satellite also sang the legal blues, losing 5.7% on Wednesday, following initiation of a suit by members of the Recording Industry Association of America. The organization alleges that the XM Inno device constitutes an infringement as it allows music broadcast on the radio to be recorded and replayed.
8. True. On Thursday, BellSouth demanded in a written letter to the newspaper's publisher that it immediately retract an article published May 11. The article allegedly contained "false and unsubstantiated statements" and claimed that the company had a contractual agreement with the National Security Agency under which it turned over customers' telephone records.
9. (d). The Big Board celebrated many things last week, including the series finale of NBC sitcom Will & Grace and its own birthday. While the market's dour mood may have dampened festivities, it didn't rain on speculation that NYSE Group may merge with Euronext. Reports surfaced that one of the largest shareholders of the European stocks and derivatives operator had dropped its previous opposition to a potential deal and that NYSE Group was at work finalizing an offer.
10. True. Following the fast-food chain's initial public offering Thursday, its freshly made 25 million shares closed for the week at $18.60, up a tasty 9.4% from its initial trading price of $17.
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!
Dell, Microsoft, Intel, Wal-Mart, Vodafone, and Gap are Inside Value picks.Dell, Gap, UnitedHealth, and Tenet Healthcare are Stock Advisor selections. UnitedHealth is a Stock Advisor recommendation. XM is a Rule Breakers recommendation. Take the newsletter that best fits your investing style for a 30-day free trial.
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 The New York Stock Exchange Group. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
