Fireworks displays lit up the skies last week, but any sparks intended to ignite a rally on Wall Street were extinguished by the latest employment data.
Before the July 4 holiday, stocks were up Monday in a shortened trading session, boosted by a weak manufacturing report and third-quarter buying.
When the market reopened Wednesday, a report showing stronger-than-expected job growth in June, higher oil prices, and North Korean missiles combined to torpedo investor enthusiasm and sink the major indices. The Dow's 76-point decline almost negated the index's 77-point increase from its prior close. On Thursday, weaker-than-expected data from the services sector and declining oil prices sparked equity prices, sending the Dow up 73 points.
Friday's awaited employment report provided the grand finale to the week's bipolar but charmingly symmetrical index antics. It revealed slowing jobs growth combined with higher wages, with the figures fueling fears of stagflation. Several poor earnings reports and warnings also sent the major indexes skidding sharply. The Dow fell more than 134 points, or 1.2%, its largest percentage decline in a month.
The show continues this week, with Friday bringing retail-sales and consumer-sentiment figures. Other economic data scheduled for release include wholesale trade and consumer credit on Monday, more retail-chain data on Tuesday, the international trade balance on Wednesday, and import and export prices and business inventories -- also on Friday.
Alcoa kicks off the second-quarter earnings season on Monday. Other corporations reporting this week include Genentech and Ruby Tuesday on Tuesday, Gannett on Wednesday, Marriott, Media General, Pepsi, McClatchy, and Tribune on Thursday, and GE on Friday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
| 7/7/06 Close | Weekly Change (%) | YTD Change (%) | |
|---|---|---|---|
| Dow | 11,090.67 | (0.5) | 3.5 |
| Nasdaq | 2,130.06 | (1.9) | (3.4) |
| S&P | 1,265.48 | (0.4) | 1.4 |
Commodities
| Price ($) | Weekly Change (%) | |
|---|---|---|
| Crude oil | 73.84 | (0.05) |
| Gold | 630.80 | 2.19 |
Foolish Quiz
1. Poor earnings from this company augmented the Dow's decline on Friday: (a). Advanced Micro (NYSE:AMD); (b). 3M (NYSE:MMM); or (c). Starbucks (NASDAQ:SBUX).
2. True or false: Shares of Altria (NYSE:MO) led the Dow and the S&P 500 higher on Thursday.
3. General Motors (NYSE:GM) said it intends to (a). explore an alliance with Renault and Nissan; (b). fully support its own turnaround strategy; (c). satisfactorily resolve the Delphi bankruptcy; (d). complete its GMAC transaction; or (e). all of the above.
4. True or false: Duquesne Light boosted investors' portfolios.
5. Companies reporting flashy same-store sales last week included: (a). Ann Taylor; (b). Gap; (c). Kohl's; or (d) Wal-Mart.
6. True or false: July tends to produce show-stopping investment results.
7. The companies leaving the most behind on New Jersey's gambling tables last week included: (a). Aztar; (b). Boyd; (c).Harrah's; (d). MGM; or (e) Trump.
8. True or false: You should now be able to write about googling someone without fear of a teacher's red pen or a trademark violation.
9. A new twist in the cola wars involved the attempted theft of (a). Coke's secret formula; (b). Girl Scout cookies; (c). the lyrics to "I'd Like to Buy the World a Coke"; or (d) none of the above.
10. True or false: The winner of the annual Nathan's Independence Day hot-dog eating contest on Coney Island won the equivalent of more than 1,930 shares of the company's stock.
Answers
1. (b). Dow component 3M fell 8.5% Friday after it issued an earnings warning for the second quarter because of lower sales and higher expenses. The company's worst one-day percentage slide in almost nine years accounted for 43% of the index's decline. Advanced Micro shares fell 1.6% when the company forecast that earnings will be 9% lower for the second quarter than they were for the first quarter, and Starbucks fell 5% after same-store sales didn't meet expectations.
2. True. Altria shares were hot after the Florida Supreme Court snuffed out a $145 billion punitive-damages award against big tobacco companies. Altria reached a record high of $79 before closing at $77.76, up 6% for the day. Shares of other cigarette manufacturers also rose, including Carolina Group, Loews, and Reynolds American.
3. (e). GM's board of directors met Friday and issued a statement including each of those issues but focused on the proposed three-way alliance under which Nissan and Renault would purchase up to a 20% stake in the company. Shares of GM went into the weekend higher by 1%.
4. True. Shares of Duquesne brightened up 18% when a private investment group announced Wednesday that it will take the Pittsburgh utility private in a $1.6 million transaction, expected to occur in the first quarter of 2007. Each shareholder will receive $20 per share, a 22% premium over the previous session's close.
5. (a) and (c). Retailers reported a mixed bag of results on Thursday. Ann Taylor and Kohl's both announced encouraging figures, with same-store sales up more than 12% and 7%, respectively. Although same-store sales at Wal-Mart inched up 1.2%, the company mentioned declining store traffic and whined about gasoline prices. Gap revealed a chasm in same-store sales, which declined 6%, while also warning of current clearance sales crimping margins.
6. False. According to the Stock Trader's Almanac, July ranks as the seventh-best month of the year for the S&P 500 but heralds the start of an unkind four-month period for the Nasdaq. It seems like that season has already been in full swing for the tech-heavy index.
7. (c) and (d). All bets were off when New Jersey Gov. Jon Corzine shut down Atlantic City's casinos Wednesday morning because of the state budget impasse. Although a deal was struck on Thursday, doors did not reopen until Saturday. For the week, shares of Harrah's and MGM lost the most, each dropping 6.3%. Trump, however, is the better metric for the market because all three of the company's major properties are located there. It's expected to be the biggest loser, but so far its shares have put on a somewhat better poker face, declining 4.2%.
8. True. The wordsmiths at Merriam-Webster have now added the verb "google" to their newest collegiate dictionary, along with other lofty cultural expressions such as "mouse potato" and "gastric bypass." Note the lowercase spelling, which defines the trademark as a verb.
9. (d). In a show of fair competition and brotherly love, Pepsi alerted Coca-Cola to a plot hatched by a Coke administrative assistant and two others to steal confidential corporate documents and a secret product sample and sell them to the company's archrival. The plan fizzled when an undercover FBI agent put the kibosh on the conspirators after paying one of them $30,000 in bills stuffed in a Girl Scout cookie box. (It's still not known why the Feds couldn't have just used their standard payoff briefcase or a box of any other cookie.) Coca-Cola's secret formula remained secure at all times in an Atlanta bank vault. For all of you '70s buffs, the lyrics for one of advertising's most successful campaigns are posted on the company's website. Peace and love, everyone.
10. True. The $25,000 prize can purchase about that number of the company's shares, or a whole lot of antacid. Takeru Kobayashi won the contest by downing 53 3/4 hot dogs in 12 minutes -- not a pretty sight. If the lucky winner needs a change of taste, perhaps he might consider some fish and chips, a sandwich, or roasted chicken, all of which Nathan's provides through its Arthur Treacher's, Miami Sub, and Kenny Rogers brands. The market seemed unimpressed with Kobayashi's feat, as shares closed at $12.95, down 4.1%% for the week.
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!
What type of investor are you? 3M and Wal-Mart are both Motley Fool Inside Value picks, and Starbucks is a Stock Advisor pick. Gap is a selection in both newsletters, and Coca-Cola is an Inside Value pick.
Fool contributor S.J. Caplan, a former vice president and assistant general counsel of Goldman Sachs and a former vice president and derivatives finance specialist at Lehman Brothers, owns shares of Google. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
