Stocks stumbled last week about as many times as the new Elmo T.M.X. Unlike the furry red guy's antics, the market's performance provoked no giggles.
Stocks did very little on Monday, in ho-hum trading ahead of the Fed meeting. The indices ended marginally mixed, with the Dow lingering near all-time highs.
Investors weren't laughing on Tuesday, when prices declined despite benign inflation data. Instead, a sharp falloff in housing starts, a coup in Thailand, and fears of an economic slowdown combined to trip the market. Final-hour buying stemmed the losses, and the indices closed down slightly, well off earlier lows.
The Fed's decision on Wednesday to leave rates unchanged, coupled with strong corporate earnings and lower oil prices, combined to push stocks higher. All major indices moved upwards, leaving the Dow within 110 points of its all-time record.
A sharp and unexpected decline in the typically less-noticed Philadelphia Fed's survey of business activity in the mid-Atlantic region sparked a sell-off on Thursday. Stocks dropped, with the Dow closing down more than 79 points. On Friday, stocks fell again, amid continuing concerns over the economy.
Housing data will be the hot plaything for investors this week; August existing-home sales figures are released today, with new-home sales following on Wednesday. Other economic reports scheduled for release include consumer confidence tomorrow; durable goods on Wednesday; second-quarter revised corporate profits and final second-quarter gross domestic product on Thursday; and personal income and outlays and consumer sentiment on Friday.
Corporations reporting earnings include Walgreen today; Jabil Circuit, Lennar, Paychex, Red Hat, Research In Motion, and Stride Rite on Tuesday; McCormick on Wednesday; and American Greetings, Family Dollar, and Texas Industries on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
9/22/06 Close |
Weekly Change (%) |
YTD Change (%) |
|
|---|---|---|---|
|
Dow |
11,508.10 |
-0.5 |
7.4 |
|
Nasdaq |
2,218.93 |
-0.7 |
0.6 |
|
S&P |
1,314.78 |
-0.4 |
5.3 |
Commodities
|
Price ($) |
Weekly Change (%) |
|
|---|---|---|
|
Crude oil |
60.55 |
-5.42 |
|
Gold |
595.20 |
1.85 |
Foolish Quiz
1. This index recorded its fourth-highest close last week:
(a) the Dow
(b) the Nasdaq
(c) the S&P 500
2. True or false: The S&P 500 came within a point of closing at its five-year high last week.
3. This company's shares hit a new five-year high following its earnings report:
(a) Circuit City
(b) ConAgra
(c) General Mills
(d) Morgan Stanley
4. Which tech stock disappointed investors on Tuesday -- Oracle
5. Last week's deal news included the following companies:
(a) Citizen Communications
(b) General Motors
(c) Smithfield Foods
(d) Symbol Technologies
6. True or false: Dead men can be awarded stock options.
7. The Fed cited the following factors in its decision to leave rates unchanged:
(a) a cooling housing market
(b) moderating energy prices
(c) troubled hedge funds
(d) pretexting
8. Which company signed a business arrangement with the Metropolitan Opera -- Napster or Sirius?
9. News involving the Big Board last week invoked the following names:
(a) Laura Bush
(b) Elmo
(c) Elvis
(d) Euronext
(e) Marco Polo
10. Which costs more -- the new T.M.X. Elmo or a share of Mattel?
Answers
1. (a). The Dow closed at the lofty level of 11,613.19 on Wednesday, its fourth-highest close ever.
2. True. On Wednesday, the S&P 500 closed at 1325.18, only to drop nearly 1% in the following two days.
3. (d). Following robust earnings growth reported the prior week by its other investment-banking buddies, Morgan Stanley didn't disappoint when it revealed its latest performance on Wednesday. Third-quarter earnings at the Wall Street firm exceeded expectations, jumping 59%, and shares hit a new five-year high of $73.65.
Other companies also reported decent earnings. On Wednesday, Circuit City posted an 11% growth in second-quarter sales, which exceeded expectations on earnings per share by a penny. Investors must have been watching something else on their flat-panel TVs, because despite the company's increase of its 2007 outlook, shares still sagged 0.1%.
On Thursday, General Mills reported that first-quarter profits rose 5.9% across product lines, and reaffirmed its full-year guidance. Shares gained 3.3%. ConAgra announced the same day that first-quarter profit fell 66%, blamed largely on a comparison to a former quarter, where results were boosted by a sale of a large stake in another company. The company raised its fiscal 2007 profit forecast, and shares traded up 1.8%.
4. No hoorays were in store for Yahoo! after the company warned at an investors' conference that it is experiencing slowing ad growth from auto and financial-services advertisers, which will likely hurt its third-quarter results. Shares of the Internet search engine sank 11.2%.
In an ironically inverse move, shares of Oracle climbed 11.2% on Wednesday following its earnings announcement after the bell on Tuesday. First-quarter profits at the software company rose 29%, beating expectations, with revenues expanding across product lines.
5. (a), (c), (d). Merger Monday proved true to its moniker as plenty of news came down the pipeline. Among the mergers, rural phone carrier Citizens Communications announced its $1.16 billion acquisition of Commonwealth Telephone Enterprise. Shares of Citizens rang up three pennies, while those of Commonwealth gained 6.1%.
Smithfield Foods, the country's largest pork producer, announced that it would purchase Premium Standard Farms, the country's second-largest pork producer, for approximately $810 million. News of the deal, sure to strike fear in the hearts of pigs everywhere, greased Premium's shares by 12.8%, while those of Smithfield slipped 3.5%.
Shares of wireless equipment maker Symbol Technologies raced up 15% Monday, on a rumor that the company would imminently place itself on the auction block, with Motorola as a leading bidder. Motorola gained 2.3%. The rumor became reality on Tuesday, when Symbol confirmed that Motorola agreed to acquire its shares for $3.9 billion, in a transaction to be completed later this year or early in 2007. Shares of Symbol tacked on another 0.5%, while Motorola slipped two cents.
General Motors and Ford opted out of the mergers race. Published reports mentioned that although the two firms discussed an alliance, the maneuver stalled. It has now been dropped, without further plans to restart discussions. Ford fell 3%, while GM slipped 0.6%.
6. True, especially if you work for Cablevision. The company acknowledged last week that it had awarded stock options to an executive after his death but backdated them to appear that the grant had been made while he was still alive. Guess what? The cable company's options-dating practice is under investigation by the SEC and the New York U.S. Attorney's office.
7. (a), (b). The Fed acknowledged declines in energy prices and the housing market in its policy statement. Staggering losses at hedge fund Amaranth Advisors from natural-gas investments made other headlines last week, with the Connecticut Attorney General vowing to investigate the matter. Hewlett-Packard also remained under public scrutiny, with Chairman Patricia Dunn resigning and CEO Mark Hurd offering to testify before a House committee examining the company's pretexting scandal.
8. Sirius. The satellite broadcaster announced Wednesday a multiyear agreement with the Met to create a music channel for opera buffs. Perhaps its shareholders are not so highbrow. Shares didn't react much, although they did decline 6.1% the previous day amid rumors, later denied, that Howard Stern might be departing.
In another music venue, Napster could soon be singing its last solo aria. Shares surged 14% on Tuesday after the online music provider made noise about hiring UBS to explore strategic alternatives.
9. (a), (d), (e). The NYSE Group announced on Monday that it had purchased an equity position in Marco Polo Network, an electronic trading platform focused on emerging markets. Terms of the transaction were not disclosed. In a historic moment later that day, Laura Bush rang the closing bell, the first time a First Lady did so. No sightings of Elmo or Elvis were mentioned, but that doesn't mean they weren't there, too. On Friday, NYSE Group outlined details of a plan for a separate legal structure apart from Euronext, should the two exchanges consummate a merger. Shares rose 7.1% for the week.
10. T.M.X. Elmo. The newest version of the fuzzy monster retails for $39.99 -- if you can find the toy, set to be the hottest new children's gift this holiday season. Shares of Mattel receded a nickel on Tuesday when its Fisher-Price unit unveiled the laughing little guy. Shares gained 0.7% for the week, to close at $19.44.
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 is a Motley Fool Inside Value pick. Yahoo! is a Motley Fool Stock Advisor selection. Citizens Communications and Commonwealth Telephone Enterprise are Motley Fool Income Investor picks. Last but not least, NYSE Group is a Motley Fool Rule Breakers pick. Whatever your investing style, the Fool has a newsletter for you.
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 NYSE Group. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
