I probably would rather have tuned out most of the music on the Street last week, but the Street played it anyway. Let's review.
"War" by the Middle East Minstrels
I can't tell you what war is good for, but I can tell you for sure that the threat of war is not good for stock markets. History has shown us that war itself is not necessarily bad for markets. In fact, when the current Iraq war started, we had a nice little bull run. When we stand on the brink of war, though, and nobody's quite sure which way things will go, investors tend to get very defensive.
A case in point is the current hostilities between Israel and the Hezbollah forces located in southern Lebanon. One week ago from last Thursday, Israel launched an attack against Hezbollah following the kidnapping of two Israeli soldiers. The clash has now been going on for more than a week, and we still don't know whether it will conclude quickly, be forced into a cease-fire, or extend into other nearby countries, such as Syria and Iran. Today, though, as Secretary of State Condoleeza Rice visits Beirut, onlookers hope that progress will begin toward some sort of solution.
Making matters worse, investors have to weigh the possibility of another oil embargo by Iran, just as we saw back in the '70s. You think the gas pumps are taking consumer dollars out of the economy now? Taking a top-five exporter offline is not going to be good news for anyone.
"Another Brick in the Wall," parts 1, 2, and 3, by The Intel, AMD, and Dell Dynamo
Three gorillas of the PC market teamed up last week to bring PC-related stocks, and some of the broader technology clique, to their knees. Intel
"Jump" by The Big Ben Bernanke Project
You could almost hear the sound of Eddie Van Halen's guitars ripping through the trading floor -- stocks jumped on Wednesday after Fed Chairman "Gentle Ben" Bernanke indicated that the Fed might consider thinking about a pause in interest-rate hikes in August after bumping the rate at 17 consecutive Fed meetings. Investors and economists alike are beginning to worry that the Fed could end up going too far with further interest-rate hikes, pushing the economy into a recession.
The Fed's ability to manipulate interest rates is designed as a tool to combat inflation, which, at high levels, can destabilize to the economy. Generally speaking, when our economy is growing rapidly, we begin to max out our supplies -- skilled workers, natural resources, and so on. When that happens, prices start to creep up as companies compete for the resources remaining. By hiking up interest rates, the Fed hopes to curtail companies' investment spending and thereby slow inflation. But here's the problem: Tighten too much, and you go from curtailing spending to chopping it right off at the head, sending shock waves through the economy. This is what investors are afraid will happen.
Of course, after a 200-plus-point day on the Dow following Bernanke's hopeful, though extremely noncommittal, words, the market was back to "Black and Blue" by Thursday, losing more than 100 points as investors continued to file out.
"Bad Day" by YahooOuch!
A bad day is really just the beginning of how to describe Yahoo!'s
Of course, that's not really a Daniel Powter bad day; a Daniel Powter bad day happens when you also announce that you're holding off releasing a highly anticipated update to your search technology. And that is exactly what Yahoo! did. And boy, did the selling commence. By week's end, Yahoo!'s stock lost around 20% of its value. Of course, if you want my two cents, I still wouldn't say you're looking at a value here at 50 times trailing earnings, even though a lot of people have started to throw around the V-word when talking about Yahoo!'s stock.
"Rockin' in the Free World" by The Apple Animals
I'm going to go out on a limb here and say that I hate those new Apple
That said, it's hard to argue with Apple's results. On Wednesday, Apple announced that it had beaten analyst expectations by a solid $0.10 per share, largely on the strength of Mac notebook sales. Not all that long ago, people were using "bankruptcy" in the same sentence with "Apple," when the then-struggling computer maker just couldn't seem to get it together. But since the entry of the category-busting -- nay, category-nuking -- iPod in the realm of MP3 players, Apple has garnered a supercool chic image that seems to be rubbing off on its computers.
Still, will anyone be able to take Apple off its cooler-than-thou pedestal? Microsoft
For more melodic Foolishness:
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Fool contributor Matt Koppenheffer prefers rocking in the free world to putting bricks in the wall, but he knows that sometimes you have to fight for your right to party. Matt does not own any of the stocks mentioned above. The Fool's disclosure policy prefers to listen to Morrissey alone in the corner.