There WILL Be a Quiz: Weekly Markets Recap

Stocks initially entertained us with their own version of A Midsummer Night's Dream last week, with semiconductors Puckishly imparting various plot twists to the market. But by midweek, global conflict stole the show, leaving investors wishing that the market's performance was all just a nightmare from which they could awaken.

The week opened with mixed results on Monday. While the Dow and S&P 500 finished up modestly, semiconductors reacted to concerns over further Fed tightening, taking the broader tech sector down. Tuesday initially brought negative earnings news and generally declining prices, but afternoon events proved that the previous day's semiconductor decline was all much ado about nothing. A leading chip manufacturer sprinkled pansy juice on the sector in the afternoon in the form of upbeat comments, turning the overall market around and leading the major indices upwards.

However, escalating tension in the Middle East and generally unimpressive second-quarter earnings gave the market concerns on Wednesday. Semiconductors played a role again, as the sector changed course to match the downward spiral of the tech market. The Dow dropped more than 121 points, and the Nasdaq lost 1.8%. On Thursday, stocks plummeted once more, as fresh Middle East violence, surging oil prices, and more negative corporate news took center stage. The Dow fell more than 166 points, or 1.5%, while the Nasdaq slid 1.7% and the S&P 500 lost 1.3%.

Friday brought a third day of selling amid intensifying global violence. A weaker-than-expected retail sales report and rising oil prices added to the market's woes, leaving the major indices in red ink as the curtains closed on the trading session. The day left the Dow barely hanging onto a positive return for the year, while the Nasdaq and S&P 500 sank deeper into negative territory.

This week's more significant economic reports include the producer price index tomorrow and the consumer price index on Wednesday. Other data scheduled for release include industrial production today, comparable chain-store sales and a homebuilders' index tomorrow, and housing starts on Wednesday. Thursday will see the publication of the prior FOMC minutes and leading indicators; the same day, Fed Chief Ben Bernanke will also give his semiannual report to Congress on monetary policy.

A steady stream of earnings reports across industries will keep investors busy. Corporations reporting this week include Citigroup, Harley-Davidson, Mattel, and Novartis today, and IBM, Merrill Lynch, Coca-Cola, The New York Times, Wells Fargo, and Yahoo! tomorrow. Wednesday will bring earnings news from Abbott Labs, Apple, eBay, General Dynamics, Kinder Morgan, Motorola, Rambus, UnitedHealth, and Yum! Brands.Amgen, Broadcom, Dow Jones, Ford, Google, Nokia, Nasdaq, and Wyeth will be heard from on Thursday, followed by Caterpillar, Halliburton, and Schlumberger on Friday.

Stay market-tuned and Foolish!

Capital Markets Summary

U.S. Equities

Commodities

Foolish quiz
1. The Dow and Nasdaq suffered their worst three-day declines since: (a) two months ago; (b) more than one year ago; (c). three years ago.

2. True or false: Stocks attempted a comeback Friday afternoon.

3. Companies reporting solid earnings included: (a) Alcoa (NYSE:AA); (b) General Electric (NYSE:GE); (c) Marriott (NYSE:MAR); (d) Pepsi (NYSE:PEP).

4. True or false: Lucent deserves credit for turning around the tech sector in Tuesday's trading session.

5. Last week's deal news included the following companies: (a). Heritage Property; (b). Kimco; (c) Petco; (d) all of the above.

6. True or false: The S&P 500 announced last week that it would add a company not formally in existence at the time to its roster this week.

7. Sectors faring poorly last week included: (a) housing; (b) oil; (c) semiconductors; (d) transportation; (e) utilities; (f) all of the above and more.

8. Genentech or Genzyme: Which biotech reported strong second-quarter results but had its shares turn in a fragile performance for the week?

9. Madison Avenue is giving makeovers to the following corporate mascots: (a). the romantic lead for I Can't Believe It's Not Butter; (b) the Jolly Green Giant; (c) Mr. Peanut; (d) the spokesdog for Old Navy.

10. True or False: A Shakespeare First Folio edition sold at auction last week for an amount equal to the income generated for Williams-Sonoma in the last quarter by unused gift cards.

Answers
1. (b) The two averages endured their worst three-day declines since April 2005, when economic weakness at home and protests in China sidelined stocks.

2. True. The market attempted to rally in the last half-hour of trading, but it could not muster sufficient strength to overcome anxiety over holding long positions going into the weekend.

3. (b), (c), (d). Although Alcoa kicked off earnings season after the market's close on Monday with disappointing second-quarter sales and a projected slowdown in the third quarter, a few bright spots emerged later on the earnings front.

Following Tuesday's 4.9% meltdown of the aluminum producer's shares, Thursday brought better news. Marriott reported a more-than-hospitable 35% increase in its second-quarter profit, attributable to higher room rates and increased sales, and raised its full-year forecast. Still, its shares fell 3.3%, unable to turn away the overall market's downward direction.

On the same day, Pepsi announced a 14% increase in its second-quarter profit, resulting primarily from non-carbonated beverage sales and strong international growth, and revised its guidance upward. The company also juiced things up by announcing a partnership with Ocean Spray Cranberries to codevelop non-carbonated beverages. After hitting an all-time high, shares bubbled up 1.6%.

General Electric reported a 4% earnings increase across its business lines on Friday, but shares suffered a brownout as the company disappointed analysts by not increasing its guidance. Shares hit a 52-week low, closing down 1.7%.

4. False. Lucent contributed to Tuesday morning's decline when it issued an earnings warning. KLA-Tencor (NASDAQ:KLAC) transmitted the sector to higher ground in the afternoon, when its chief executive officer remarked at an analyst meeting that the company had a "very good quarter," and that it appears to have exceeded expected bookings for the quarter ended in June. Shares of the chip maker rose 8.2%, helping to lift the Philadelphia Semiconductor Sector Index 3.3%.

5. (d). Just to make sure you're paying attention at all times, deals making the news included two separate REIT transactions announced prior to last Monday's opening bell, and the privatization of a pet-care company made known on Friday.

First, Boston-based strip-mall REIT Heritage Property said that it is being acquired for $3.2 billion by Centro Watt, a U.S. and Australian joint venture, in a deal expected to close in the fourth quarter. Shares closed up 2.7%. Then, shopping center REIT Kimco announced its intention to acquire San Diego-based Pan Pacific Retail Properties for $2.9 billion in cash and stock. Shares of Kimco advanced 1.5%, while those of Pan Pacific inched down 0.9%.

Last but certainly not least, for the second time in six years, Petco said that it will be going private again. The company will be purchased by Leonard Green & Partners and Texas Pacific Group in a deal valued at $1.68 billion, representing a 49% premium to Thursday's closing price, and fetching a 43.39% treat for its shareholders by the day's end.

6. True. After the close of trading today, the S&P 500 is expected to replace Cooper Tire with Windstream, a company formed by the merger of Alltel (NYSE:AT) and Valor Communications, which had not yet been completed at the time of the index's announcement last week. This kind of optimistic planning ahead probably doesn't seem odd at all to those folks who enter their yet-unborn children's names on pre-kindergarten waitlists.

7. (a), (c), (d). Shame on you if you chose (f)! Didn't you notice that the Amex Oil Index gushed 0.9%, while the Philadelphia Utilities Index lit up a brilliant 0.4%? Meanwhile, the Philadelphia Housing Index sank 7.5%, the Philadelphia Semiconductor Index fell 3.6%, and the Dow Jones Transportation Index moved down 5.2%.

8. Genentech. Although the firm reported a 79% jump in second-quarter earnings, shares fell on news that the FDA may delay approval of its colon-cancer drug Avastin for use against breast cancer. Shares of the company declined 6.1% for the week. Shares of Genzyme rose 5.1% on the strength of solid second-quarter earnings, which beat analyst expectations.

9. (a), (c), (d). The New York Times reported last week on the recent makeover movement affecting many of our most recognizable marketing icons. Although his face still lurks on the "Kitchen of Love" page of its website entitled tasteyoulove.com, a younger soap-opera actor will soon replace Fabio for Unilever's faux-butter product. Meanwhile, Kraft Foods (NYSE:KFT) is letting the public vote on Mr. Peanut's outfit this summer, and the Old Navy unit of Gap will announce its new spokesdog later this month. As for the Green Giant, he apparently remains jolly; sponsor Del Monte has no reported plans to alter his appearance.

10. False. The Bard's work sold for $5.2 million at Sotheby's in London, a fraction of the $12 million in income from unredeemed gift cards that Williams-Sonoma reported last week. The specialty retailer also cut its second-quarter forecast and announced that its chief executive officer would retire at the end of the week. Perhaps Mr. Market really believes that classic literature is more valuable than pots and pans. For the week, Sotheby's gained 0.7%, while shares of Williams-Sonoma fell 4.8%.

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!

Mattel, Coca-Cola, and Gap are Motley Fool Inside Value picks. Alltel, Kraft, and Unilever were selected by Motley Fool Income Investor . UnitedHealth, eBay, and Gap are all Motley Fool Stock Advisor picks.

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 Google. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.