Market 360: The Best and Worst of the Week for US Equities, Commodities, Currencies, and More
For the week ending Friday, May 9, 2008, the U.S. Markets were negative for the week, with the Dow falling more than 200 points on Wednesday, making it the biggest point drop since 4/11/08. The markets’ tumble was led by disappointing quarterly losses from Fannie Mae (FNM) and AIG (AIG), with Financials being the worst performing sector for the week, falling by 6.30%. Also, weak home sales data and a five-day consecutive record close in Crude Oil weighed on U.S stocks.
Next week the markets will watch for Consumer Price Index, the most indicative gauge of inflation, and Housing Starts, which will provide the status on the health of the housing markets. The big companies reporting earnings next week include: Sprint Nextel (S), Wal-Mart (WMT), and Hewlett-Packard (HPQ).
-American International Group shares fell 17.86% for the week, after the company posted a first quarter net loss of $7.81 billion dollars or $3.09/share on write-downs of credit derivative securities. The company plans to raise $12.5 billion in new capital to cover some of its losses.
-UBS AG unveiled a first-quarter net loss of $10.9 billion. The Swiss bank also stated it will cut 5,500 jobs due to sub-prime related losses and announced that it would sell $15 billion in subprime mortgages to Blackrock (BLK). UBS stock traded down 10.80% for the week on its disappointing earnings.
**In addition, Morgan Stanley , JPMorgan (JPM) and Lehman Brothers are also expected to announce cuts in their workforce.
-Fannie Mae’s first quarter net loss of $2.19 billion or $2.57/share was worse than expected, as the company missed analysts’ estimates by $1.76/share. The company also announced a plan to raise $6 billion in new capital through a public stock offering. Credit losses have led to a year-to-date decline of 30.44% in its stock value.
**On Thursday, Congress approved a broad financial package designed at assisting the ailing housing market, with a $300B federal guarantee as its centerpiece.
**Shares of both Fannie Mae (FNM) and Freddie Mac were down 5.73% and 7.16% respectively for the week on continued uncertainty over congressional efforts to reform the two agencies.
Disney reported a 22% rise in its 2Q net income to $1.77 billion, mostly helped by strong growth in its media-networks, studio entertainment, and parks and resorts operations. Disney’s shares rose 2.42% for the week.
-Marvel Entertainment shares jumped 7.2% on Monday after raising its full year earnings guidance from $1.35/share to $1.55/share as the debut of “Iron Man” brought the company an estimated gross of $100 million over the weekend. However, the company also reported a 3.4% drop for first-quarter net income to $45.2 million.
-MGM Mirage posted a 30% decline in 1Q net income, while the company’s CEO, Terry Lanni, said that the company might separate its casino and hotel operations. MGM’s shares jumped 7% on the news, but finished the week up 3.37%.
-Cisco’s third-quarter net earnings fell by 5.34% due to rising expenses as the company reported a net income of $1.77 billion compared with $1.87 billion a year earlier. Cisco’s shares fell 4.71% for the week on negative results.
-Synchronoss Technologies shares were down by 43% on Wednesday after the company reduced its outlook for 2008 and warned that the unlocking of the iphone hurt its revenue. The stock price fell below its 52 week low of $15.15. Synchronoss also posted a first-quarter net income increase of 16.8% to $4.31 million, but closed down 43.68% for the week on the gloomy outlook.
-D.R Horton noted a second-quarter loss of $1.31 billion or $4.14/share due to increased inventories and write-downs in assets. DHI said that it closed on 6,719 homes in the latest quarter, compared with 9,792 homes for the same quarter a year ago. The company’s stock declined 5.24% for the week on the quarterly losses.
-Alpha Natural Resources’ net income tripled to $25.5 million helped by record-high coal prices. Shares of ANR finished the week 15.69% higher.
M&A, Deals, Corp Actions:
- Citigroup announced on Friday that it plans to eliminate around $400 billion in assets over the next two to three years in an effort to improve efficiency and profitability. Citigroup shares ended the week down 10.46%.
-Yahoo’s stock plunged 15% on Monday as Microsoft withdrew its $47.5 billion bid, marking its biggest one-day percentage decline since July 2006. Meanwhile, Google’s shares strengthened by 1.43% on the same day due to weakened competitive threats and a potential advertising partnership with Yahoo. Microsoft’s shares managed to move up 0.57% for the week
*Google is rumored to be exploring a deal with Yahoo to take partial control of its search engine advertising
-Shares of Sprint Nextel rose 3.8% on Monday as the German phone giant, Deutsche Telecom , announced its interest in acquiring Sprint, the third largest US wireless carrier, in order to strengthen its North American unit.
**Sprint Nextel (S) and Clearwire Corp. announced their plans to merge their wireless broadband businesses to form a $14.55 billion joint venture with both companies focusing on the deployment of a high-speed mobile WiMAX network. Technology companies such as Intel , Google (GOOG) , Comcast , Time Warner and Bright House Networks will invest a total of $3.2 billion in the new company. Shares of Clearwire Corp. declined by 7.05% for the week.
-Bank of America ) announced that the company might have to re-negotiate a lower-price for Countrywide Financial due to a larger than planned $20-$30 billion in write-downs for Countrywide mortgage loans. As a result, both CFC and BAC shares declined 7.89% and 5.56% respectively for the week.
Retail Same-Store Sales:
-Wal-Mart (WMT) and Costco were amongst the top performers with a 3.2% and 8.0% gain in same-store sales respectively, helped in large part by Easter sales. Nonetheless, shares of WMT and COST were down 0.56% and 0.97% for the week.
-The markets will also look to Retail Sales next Tuesday for another read on the consumer.
-International Trade: The US trade deficit narrowed to $58.21 billion in March from $61.7 billion in February, mostly helped by declining imports across the board.
-The National Association of Realtors’ index of pending home sales slipped 1% in March to 83. The Realtor’s Index is 20.1% lower from its March 2007 level of 103.9. The index is not showing any signs of recovery.
-Consumer Credit grew by a whopping $15.3 billion in March, compared to the previous month's revised increase of $6.5 billion. Consumer borrowing in March had the largest growth since November 2007.
-Non-Farm Business Productivity and Unit Labor Costs came in better than expected for the first quarter as labor productivity rose at a 2.2% annualized rate, while economist had projected a 1.7% rate increase. Unit Labor Cost, a key gauge of inflationary pressure, also moved up 2.2%, a slower pace than the economists’ projection of 2.6% for the first quarter.
-U.S. Wholesale Inventories were below expectations as inventories decreased by 0.1% in March compared to a 0.9% rise in February. Economists had estimated a 0.5% increase. The setback in wholesale inventories came from weakness in autos, furniture, and lumber.
-Initial Jobless claims fell by a lower than expected 18,000 claims to 365,000 for the week of 5/03. However, economists believe that the data still shows a weak labor market.
-The European Central Bank (ECB) and the Bank of England (BOE) left their benchmark rates unchanged at 4.0% and 5.0%, respectively to keep inflation in check.
-EIA Crude Oil Inventories increased as stockpiles jumped 5.7 million barrels for the week of 5/02, compared to the previous week’s inventories of 3.8 million barrels
-Crude Oil for June delivery reached five consecutive days of new-record closes from 05/05-5/09 with oil hitting an all-time high of $126.25 per barrel on 05/09. Crude Oil for June delivery advanced 8.36% for the week, and is now up by nearly 34% year-to-date.
**Goldman Sachs’ analysts are forecasting that tight supplies could likely have a “super-spike” impact in oil prices ranging from $150 to $200 a barrel within the next two years.
**At the retail level, the gasoline national average price set new records, as per the AAA report of $3.645/gal on 5/8 and the EIA national average of $3.613 as of 5/5, up 10 cents from the previous week, and a total of 56 cents from a year ago.
**The record for the diesel national average price was set on 5/01 at $4.251/gal. The EIA diesel national average is $4.149 per gallon as of 5/5, up $1.357 from a year ago.
-RBOB gasoline for June delivery set a new record close of $3.1378 /gal for the fourth straight day on 5/08, as it moved up 7.84% for the week. RBOB gasoline hit an all time intraday high of $3.2038/gal on 5/09.
-Heating Oil futures for June delivery posted their biggest weekly dollar and percentage increase ever. Heating Oil settled at a new record close for the fifth consecutive day at $3.646/gal on 5/09, and finished the week up 13.28%.
-Coal Futures are at an all-time record due to the high prices in crude making coal a cheaper alternative. Central Appalachian Coal future contracts at the NYMEX jumped 6.81% for the week.
-Copper hit an all-time high on 5/05 during intraday trading at $4.2605/pound as Chilean state-owned Coldelco went on strike. The copper futures for July delivery were slightly down 2.66% for the week.
-Rough Rice was the best performer amongst the grains, and July futures were up 9.69% for the week. The cyclone in Myanmar wiped out the country's rice patties, turning the country from a rice exporter into an importer, sending rice futures higher.
-Corn futures for July delivery hit a new intraday record of $6.29/bushel on 05/09 as added pressure for alternative fuels due to record-high energy prices intensifies. Corn futures contracts at the Chicago Board of Trade increased 2.57% for the week.
During Friday afternoon, the U.S. dollar was mixed against the euro, yen, pound sterling, and Swiss franc, as crude oil prices continued to hit new records, and renewed credit worries prompted by the bigger-than-expected net income loss at AIG brought uncertainty back into the markets.
- The euro traded at 1.5466 against the US dollar on Friday, from $153.92 late Thursday. The US dollar lost ground against the euro as the ECB left rates unchanged at 4%, and showed no signs of changing its current monetary policy outlook.
- The US dollar fell against the Japanese yen, with one dollar purchasing Y102.94 on Friday from Y103.72 late Thursday. The dollar weakened approximately 2.35% versus the Japanese currency, trading at its lowest level since April 23 of this year.
- The pound sterling traded at $1.9499 per pound on Friday from $195.40 late Thursday. The pound sterling lost approximately 1.11% against the dollar for the week, and is now trading at its lowest level since February 21, 2008.
- The greenback declined versus the Swiss franc on Friday to 1.0412 francs per US dollar from 1.0510 francs late Thursday.
• The Dow ended down -312.32 or -2.39% -3.91% for the week
- Friday, the Dow closed at 12,745.88 down -120.90 or -0.94%
- The Dow is Negative YTD down -3.91%
- The Dow is off by -1,418.65 or -10.02% from the market peak on October 9th of 14,164.53
• The NASDAQ ended down -31.47 or -1.27% for the week
- Friday, the NASDAQ closed at 2,445.52 down -5.72 or -0.23%
- The NASDAQ is Negative YTD down -7.80%
- The NASDAQ is off by -413.60 or -14.47% from the market peak on October 31st of 2,859.12
• The S&P 500 ended down -25.62 or -1.81% -5.45% for the week
- Friday, the S&P 500 closed at 1,388.28 down -9.40 or -0.67%
- The S&P 500 is Negative YTD down -5.45%
- The S&P 500 is off by -176.87 or -11.30% from the market peak on October 9th of 1,565.15
S&P Sector Performance for the week ending Friday, May 9, 2008:
S&P 500 Energy Sector (.GSPE) Up 17.94 or 2.93%
S&P 500 Materials Sector (.GSPM) Up 5.17 or 1.95%
S&P 500 Information Technology Sector (.GSPT) Down -3.62 or -0.94%
S&P 500 Consumer Staples Sector (.GSPS) Down -4.01 or -1.38%
S&P 500 Industrials Sector (.GSPI) Down -6.48 or -1.85%
S&P 500 Utilities Sector (.GSPU) Down -4.41 or -2.13%
S&P 500 Health Care Sector (.GSPHC) Down -8.21 or -2.20%
S&P 500 Telecomm Services Sector (.GSPTS) Down -4.05 or -2.63%
S&P 500 Consumer Discretionary Sector (.GSPD) Down-7.47 or -2.86%
S&P 500 Financials Sector (.GSPF) Down -23.36 or -6.30%
S&P Top 10 Performers for the week ending Friday, May 9, 2008:
Sprint Nextel Corp (S) Up 1.49 or 18.88%
National Oilwell Varco Inc (NOV) Up 10.21 or 15.19%
TECO Energy Inc (TE) Up 2.41 or 14.48%
Anadarko Petroleum Corp (APC) Up 9.23 or 13.76%
Advanced Micro Devices Inc (AMD) Up 0.78 or 12.66%
Noble Energy Inc (NBL) Up 9.75 or 11.24%
Peabody Energy Corp (BTU) Up 6.20 or 9.94%
United States Steel Corporation (X) Up 14.06 or 8.95%
El Paso Corp (EP) Up 1.58 or 8.95%
Hess Corp (HES) Up 9.40 or 8.84%
S&P 10 Worst Performers for the week ending Friday, May 9, 2008:
Barr Pharmaceuticals Inc (BRL) Down -11.27 or -21.99%
Countrywide Financial Corp (CFC) Down -1.22 or -20.40%
Ambac Financial Group Inc (ABK) Down -1.00 or -18.59%
American International Group Inc (AIG) Down -8.76 or -17.86%
MBIA Inc (MBI) Down -1.99 or -17.43%
Washington Mutual Inc (WM) Down -1.84 or -15.11%
Legg Mason Inc (LM) Down -9.78 or -15.08%
Tesoro Corp (TSO) Down -3.52 or -13.81%
Mylan Inc (MYL) Down -1.80 or -13.62%
General Motors Corp (GM) Down -2.91 or -12.54%
Dow Top Performers for the week ending Friday, May 9, 2008:
ALCOA Inc (AA) Up 2.93 or 8.11%
The Walt Disney Co (DIS) Up 0.81 or 2.42%
Chevron Corp (CVX) Up 2.07 or 2.17%
Hewlett-Packard Co (HPQ) Up 0.77 or 1.59%
International Business Machines Corp (IBM) Up 0.88 or 0.71%
Microsoft Corp (MSFT) Up 0.15 or 0.51%
Wal-Mart Stores Inc (WMT) Down -0.32 or -0.56%
Exxon Mobil Corp (XOM) Down -0.79 or -0.88%
Intel Corp (INTC) Down -0.21 or -0.89%
Merck & Co Inc (MRK) Down -0.38 or -0.97%
Dow Worst Performers for the week ending Friday, May 9, 2008:
American International Group Inc (AIG) Down -8.76 or -17.86%
General Motors Corp (GM) Down -2.91 or -12.54%
Citigroup Inc (C) Down -2.76 or -10.46%
Bank Of America Corp (BAC) Down -3.14 or -7.89%
Home Depot Inc (HD) Down -2.14 or -7.10%
The Coca Cola Co (KO) Down -2.62 or -4.46%
JPMorgan Chase and Co (JPM) Down -2.09 or -4.30%
Verizon Communications (VZ) Down -1.68 or -4.24%
Pfizer Inc (PFE) Down -0.82 or -3.98%
AT&T Inc (T) Down -1.54 or -3.84%
Key Earnings next week:
Monday: Sprint Nextel (S)
Tuesday: Electronic Arts (ERTS), Wal-Mart (WMT)
Wednesday: Arcelor Mittal (MT), Deere (DE), Freddie Mac (FRE), Macy's (M), Sony (SNE)
Thursday: Hewlett-Packard (HPQ), JC Penney (JCP), Kohl's (KSS)
Economic Data next week:
Tuesday: Retail Sales
Wednesday: Consumer Price Index
Thursday: Industrial Production
Friday: Housing Starts, Consumer Sentiment