Stocks behaved much like Tiger Woods last week, consistently coming up with bogeys and ultimately failing to make the cut.
As Wall Street teed up on Monday, concerns over forthcoming economic reports and gloom from the previous week affected the market's performance. Stocks bogeyed their opening session, with all three major indices suffering significant setbacks. The negative momentum continued on Tuesday. Stocks could not hold on to earlier gains and tumbled again in late afternoon trading.
Then, a stroke of relief came Wednesday. Despite the awaited consumer price index figures showing stronger-than-expected data and virtually confirming a rate increase at month end, stocks reversed their prior pattern of sharp late afternoon declines and instead unexpectedly surged in the final hour. The Dow jumped more than 110 points, and the Nasdaq broke its eight-day losing streak.
The broad rally continued on Thursday, cheered by moderate remarks from Fed Chief Ben Bernanke, who noted that inflation expectations have "fallen back somewhat" recently. Traders chipped the Dow over 11,000, back into positive territory for the year as it rose more than 198 points.
On its final round, stocks failed to extend the rally and choked on Friday. Amid profit taking and revived hawkish banter from another Fed official, major indices closed down to record the market's triple bogey for the week.
Will it be a mulligan this week? Economic reports scheduled for release include housing starts tomorrow, leading indicators on Thursday, and durable goods on Friday.
Corporations reporting earnings include Circuit City today, J.M. Smucker and Kroger tomorrow, Bed Bath & Beyond, Darden, FedEx, Jabil Circuit, and Morgan Stanley on Wednesday, Del Monte, Family Dollar, Oracle, and Rite Aid on Thursday, and A.G. Edwards, Sands Regent, and Verint on Friday.
Stay market-tuned and Foolish!
Capital Markets Summary
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1. The market reached its lowest levels of the year on: (a). Monday; (b). Tuesday; (c). Wednesday; (d). Thursday; (e). Friday.
2. True or False: The Nasdaq surged to its biggest percentage gain in more than two years on Thursday.
3. Shares of this investment bank rose following its earnings release: (a). Bear Stearns
4. True or False: Microsoft
5. Sectors benefiting from analyst upgrades included: (a). financial; (b). homebuilders; (c). oil service; (d). semiconductors.
6. True or False: Goldman Sachs strategist Abby Joseph Cohen believes that the S&P 500 is underpriced.
7. Companies named last week in the widening options probe included: (a). Asyst Technologies; (b). Broadcom; (c). Meade Instruments; (d). Monster Worldwide; (e). all of the above.
8. True or False: The sun shone on the initial public offering of VeraSun Energy.
9. Mark Cuban is calling himself (a). NBA championship team owner; (b). Stocksleuth; (c). arrogant; (d). all of the above.
10. True or False: Paris Hilton will have a supporting role in the proposed privatization of Parlux Fragrances.
1. (b). Tuesday's closing prices represented the worst levels since mid-November for the Dow and S&P 500, and since late October for the Nasdaq. For trivia buffs, those levels were 10,706.14, 1223,68, and 2072.47, respectively.
2. True. After prolonged suffering, the Nasdaq jumped 2.8% on Thursday to close at 2144.15, its largest one-day percentage gain since March 25, 2004.
3. (a). Despite solid reports from all three brokerages reporting earnings last week, only the Bear's shares climbed on the day of its earnings announcement. Lehman kicked off the week, reporting on Monday a 48% rise in its second-quarter profit, only to see its stock fall 5.5%. Goldman followed on Tuesday, announcing a doubling of its second-quarter profit, and watched its shares decline 4%. When Bear Stearns released the news of its 81% profit increase on Thursday, the market looked past earlier concerns over the industry's business outlooks, and shares increased 0.6%. See:
- Time for Brokerage Stocks?
- Bear Stearns Not in Hibernation
- Can Goldman Keep Its Luster?
- Not Much Lovin' for Lehman
4. False. Following Microsoft's announcement after Thursday's closing bell that Bill Gates intends to leave his active duties over a two-year period to focus instead on his charitable trust, the company's shares closed Friday three pennies higher on high volume to end the week at $22.10. The stock also came under pressure that day from reports of the company's policy during the 1990s to issue stock options at low prices. (See "Microsoft Closing the Gates Era.")
5. (d). Analysts at Goldman and UBS upgraded semiconductor stocks, and the Philadelphia Semiconductor Index rose 2.1% for the week. Morgan Stanley downgraded the housing sector on Thursday, and the Philadelphia Housing Sector Index lost 0.9% for the week. Receiving no broad ratings changes, the NYSE Financial Index declined 1.6%, and the Oil Service Sector Index slipped 0.1%.
6. True. The chief U.S. investment strategist for Goldman said last week that she believes the index should reach 1,400 by the end of the year.
7. (e). The federal investigation involving the SEC and the Justice Department into options-backdating netted each of those companies and even more. Approximately 48 companies are currently under scrutiny for the timing of their stock option grants.
8. True and False. Shares of the country's second-largest ethanol producer surged 30% on Wednesday, its first day of trading, but ran out of gas and dropped 9.8% by the end of the week. (See "Is Ethanol Worth the Hype?")
9. (a), (b). As his Dallas Mavericks battle it out in the NBA championships, various media outlets reported last week that Cuban is financing a new website, named sharesleuth.com. Aimed at investigating stock fraud, the site will be launched next month and written by a business journalist. Cuban believes that stories can then be repackaged for his high-definition television networks. As an example, he says that had the new site uncovered the Enron scandal, it would have been paired with a hip-hop parody of Ken Lay and Jeffrey Skilling to appeal to a young audience. Amazing -- he's managed to come up with an idea even worse than his ridiculous reality show, The Benefactor, from a few seasons ago. (See "Mark Cuban's Scandalous Scandal Site.")
10. True. After trying unsuccessfully to sniff out potential buyers since last summer, the chairman and CEO of perfume maker Parlux offered on Tuesday to take the company private in a proposed $200 million buyout. Two analysts recently downgraded the stock, citing sluggish sales of Paris Hilton-branded products. The firm also markets fragrances and accessories for brands including Perry Ellis, Guess, Maria Sharapova, and Andy Roddick.
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!
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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 Goldman Sachs. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy .