Although stocks began the first day of the week trading in the red, the colors changed and trading turned to green in the afternoon. A combination of lower oil prices, a less severe decline in existing housing prices, and end-of-quarter purchasing helped lift the market to push the Dow within sight of its all-time closing high.
The Dow flirted with marking higher levels for the next three days. On Tuesday, the market enjoyed a powerful rally stemming from a strong consumer confidence report. Stocks breezed higher on a better-than-expected new housing starts report on Wednesday, before losing some ground in the afternoon because of rising energy prices. The Dow traded above its record close on Thursday, prior to ending about five points shy of that mark over concerns of economic data indicating a slowdown and customary selling occurring at top levels.
A slight gust of inflationary concerns arising from personal income and consumption figures (and hawkish sentiment from the St. Louis Fed president) brought the indices down modestly in lackluster trading on Friday. The Dow ended the week within 44 points of its highwater mark.
Friday's employment report will be the most eagerly awaited data this week. Other reports scheduled for release include construction spending, manufacturing data, and pending home sales today; factory orders and non-manufacturing figures on Wednesday; and chain store sales on Thursday.
In a quiet week of earnings reporting, corporations scheduled to make announcements include Pepsi Bottling Group tomorrow; and Constellation Brands, Marriott, and Vail Resorts on Thursday.
Stay market-tuned and Foolish!
Capital Markets Summary
U.S. Equities
|
9/29/06 Close |
Weekly Change (%) |
YTD Change (%) |
|
|---|---|---|---|
|
Dow |
11,679.07 |
1.5 |
9.0 |
|
Nasdaq |
2,258.43 |
1.8 |
2.4 |
|
S&P |
1,335.85 |
1.6 |
7.0 |
Commodities
|
Price ($) |
Weekly Change (%) |
|
|---|---|---|
|
Crude oil |
62.90 |
3.88 |
|
Gold |
603.90 |
1.46 |
Foolish Quiz
1. This index rose the most in September:
(a) the Dow
(b) the Nasdaq
(c) the S&P 500
2. True or false: The Dow's highest closing level was reached in March 2000.
3. This company issued an upbeat earnings report:
(a) Jabil Circuit
(b) Lennar
(c) Lowe's
(d) Red Hat
4. True or false: Worries of Wal-Mart
5. This company launched a hostile takeover campaign last week:
(a) General Motors
(b) Pilgrim's Pride
(c) Warrior Energy
6. Which produce is giving Chiquita a stomachache -- spinach or bananas?
7. This tobacco company's shares lost the most on Monday, following a harmful legal decision:
(a) Altria
(b) Loews
(c) Reynolds American
8. Lady Justice smiled on the following companies last week:
(a) Hewlett-Packard
(b) Intel
(c) Merck
9. Which index enjoyed its largest third-quarter advance in 11 years -- the Dow or S&P 500?
10. True or false: Bernie Ebbers and Andrew Fastow will enjoy similar views of the leaf-peeping season.
Answers
1. (b). The Nasdaq rose 3.5%, outpacing the Dow's increase of 2.68% and the S&P 500's 2.49% advance.
2. False. The Dow closed at its highest level, 11,722.98, on Jan.14, 2000.
3. (a). Two tech companies reported earnings after the bell on Tuesday. Jabil reported a 50% increase in fourth-quarter revenue, although full financial results for the year will be delayed due to an investigation into past stock option grants. The company's optimistic forecast for the coming year connected with investors, as shares rose 3.8% on Wednesday. Red Hat announced a 34% decline in second-quarter profits, blamed mostly on stock compensation expenses. Shares fell 23.2% the next day.
On Tuesday, two companies cited a slumping housing market for their woes. Lowe's issued a full-year profit outlook on the low end of its projected range. Shares of the home improvements retailer slipped 1.1%. Lennar reported a 39% fall in its second-quarter profits and lowered its fourth-quarter forecast. Shares inched up 0.1%.
4. True. Despite Walgreen reporting a 25% increase in fourth-quarter earnings, shares declined 5.2% because of concerns that the drugstore chain may see generic drugs hurting its margins. Walgreen executives downplayed the potential impact of Wal-Mart's recent announcement that it will sell generic drugs for $4 per monthly prescription.
5. (b). Pilgrim's Pride ruffled feathers when the poultry producer announced on Thursday a $1 billion hostile bid for rival Gold Kist, offering $20 per share. Shares of Pilgrim's Pride marched down 0.9%, while those of Gold Kist gained 0.2%.
Shares of GM rose 2.4% on Thursday, boosted by CEO Rick Wagoner announcing that the company may continue to examine a possible alliance with Renault and Nissan Motor, and investor Kirk Kerkorian saying that his investment vehicle, Tracinda Corp., is interested in acquiring 12 million additional shares.
Warrior Energy experienced its own power surge when its shares rose 68.9% on Monday, after the natural-gas and well-services provider announced that it will be acquired in a cash and stock deal valued at more than $358 million by oilfield services provider Superior Energy Services. Shares of Superior fell 10.8%.
6. Both. The salad days are over for Chiquita, as both weak European sales of bananas and U.S. concerns over fresh spinach are wilting its business. Leading to a 14% decline in its shares for the day, the company said on Monday that it is looking into the sale of its shipping assets and will discontinue its quarterly cash dividend.
7. (a). A group of plaintiffs gained class action status on Monday in a $200 billion lawsuit claiming that consumers were misled regarding "light" cigarettes. Shares of Altria burned down 6.4%, while Reynolds American fell 3.6%, and Loews slipped 0.5%. Altria may have been damaged more than the others, because this litigation could delay (or send up in smoke) the company's plans to spin off Kraft Foods.
8. (b), (c). Last week, Intel won a legal victory when a federal judge dismissed most of the antitrust claims of Advanced Micro Devices. Merck, meanwhile, was cleared of liability for a plaintiff's heart attack in yet another federal Vioxx case. Neither Lady Justice nor the House subcommittee investigating HP's pretexting matter were smiling as the company's executives testified on Capitol Hill; most invoked their Fifth Amendment privilege.
9. The Dow. While the Dow's 4.7% quarterly rise lagged behind the S&P 500's 5.2% advance, the index's rise was the best in 11 years, while the S&P 500 enjoyed its greatest rise in nine years. For those of you keeping track, the Nasdaq climbed 4%.
10. True. These two will share the autumnal view from behind bars, although in different states. While their vistas may be a bit obscured, the immediate futures of these two disgraced executives are not. In separate developments last week, Enron's former CFO Fastow was ordered into custody immediately following his lenient sentencing of six years in prison and two years of community service, and WorldCom CEO Ebbers began serving his 25-year prison term.
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!
Wal-Mart and Intel are Motley Fool Inside Value picks. Whatever your investing style, the Fool has a newsletter for you.
Fool contributor S.J. Caplan is a former vice president and assistant general counsel of Goldman Sachs and former vice president and derivative finance specialist at Lehman Brothers. She serves as an arbitrator for the New York Stock Exchange and the NASD. The Fool has a disclosure policy.
