For the week ending Friday, June 6, 2008, the markets finished in the red as the CBOE Volatility Index again crossed above the 20 threshold and oil surged. Stocks were impacted by continued economic concerns, renewed trouble in the financial sector, and a record spike in crude oil on Friday. Although it was a negative week for the markets, the Dow managed a 200+ point rally on Thursday for the first time since 4/18, after retailers posted better than expected same store sales.
Next Week: Watch for the latest CPI, Pending Home Sales, International Trade, and Retail Sales numbers. Although it will be a quiet week for earnings, some of the companies reporting will be PepBoys , Pall Corporation , and Enersys
M&A, Deals, Corp Actions:
- Verizon announced plans to buy its rival wireless carrier Alltel for $28.1 billion, creating the largest cellular phone company in the U.S. The company expects cost savings of $1 billion after the completion of the deal. Shares of Verizon advanced 3.1% for the week.
- J.M. Smucker reported that it will acquire Procter & Gamble’s Folgers’ Coffee business for $2.95 billion in order to strengthen the company’s breakfast brands.
- Staples increased its cash offer for the Dutch office products company, CorporateExpress to $2.6 billion in an attempt to broaden its European presence. Corporate Express' ADR increased 7.27% for the week.
- SmithInternational agreed to acquire W-H Energy Services , an oil field services company, for ~$3.2 billion to strengthen the company’s drilling services. Shares of WHQ advanced 11.24% for the week on the merger news.
- IntercontinentalExchange announced plans to purchase Creditex Group for $625 million with hopes to obtain a competitive edge against credit derivatives leaders. ICE shares responded negatively to the news as the stock dropped 7.3% for the week
Other Market Moving News:
- Retailers such as Walmart, Costco and teen store Buckle reported stronger-than expected same-store sales with increases of 3.9%, 7.0%, and 34.7% respectively in May sales.
- S&P cut the key AAA ratings from the bond insurance units of MBIA and Ambac on Thursday because of their constrained financial strength due to the negative impact the housing crisis had on both companies. ABK and MBI finished down 24.92% and 21.84% for the week.
- GeneralMotors announced the closing of four North American plants used for SUV and pickup truck production due to a decline in demand for these gas-guzzling vehicles. GM’s U.S. truck & SUV sales in May fell 39.2% while car sales fell 19.5%. GM’s stock declined 5.15% for the week, and has descended 34.83% year to date.
- AvantImmunotherapeutics shares jumped 28% on Monday after the company reported positive data results from its brain cancer vaccine CDX-110 which is partnered with Pfizer . Shares of AVAN were up 24.41% for the week, while PFE’s stock shed 8.04% as it was downgraded by Goldman Sachs from buy to neutral.
- Wachovia and WashingtonMutual shares dropped 15.42% and 16.52%, respectively for the week as the two companies removed their Chief Executive Officers, Ken Thomson and Kerry Killinger in an effort to attain better company guidance.
**Credit Crunch lingers as Lehman Brothers raised concern about liquidity, and the WSJ reported that Lehman may be raising $4 billion in capital to help its balance sheet. Shares of Lehman traded on Tuesday at levels not seen since 3/17, as shares slipped 12.28% for the week.
- CrudeOil swung upward by more than $11 on Friday, a record one-day move, as it hit an all-time high intraday record of $139.12/barrel, on a weaker dollar, tensions from the Middle East, and reports from Morgan Stanley calling for oil to hit $150/barrel by July 4th. July contracts managed to finish up 8.79% for the week as crude settled at a new record $138.54/barrel.
- Naturalgas for July delivery traded up 8.46% for the week as the forecast for high temperatures throughout the U.S. raised demand from electric utilities. Natural gas settled at $12.693/ million BTU’s on Friday, and traded at levels not seen since December 2005, where natural gas settled at an all-time high of $15.378/million BTU’s.
- HeatingOil edged higher 8.38% for the week after new spikes in crude oil prices led July Futures to a new record close of $3.974/gallon on 6/06.
- RBOBgasoline traded on the NYMEX was up 5.97% for the week, as July front contracts settled at a new record of $3.548/ gallon on Friday.
**According to AAA the average retail price of gasoline hit a new record high as regular unleaded reached $3.989/gallon on 6/05/08, up 27% from a year ago.
- Corn Futures set two new close records on 6/5 and 6/6 as July delivery hit an all-time high of $6.6325/bushel on 6/06 and has shot up 42.86% year to date.
- SoybeanMeal CBOT contracts were the weekly winner amongst grain futures with July delivery trading at $373/ton, or up 9.22% for the week, and edging closer to the record close of $383.2/ton set on 3/03/08. The current spike in soybean meal is partly due to Argentina’s soy farm strike and wet weather in the U.S Midwest.
- The dollar declined across the board on Friday as crude oil prices soared over $11 / bbl to $139.12/bbl for an intraday high and the unemployment rate increased for its fifth straight month, adding uncertainty to whether the Federal Reserve will hike interest rates in the near future.
- Friday afternoon in New York, the euro rose over 1% to $1.5761 per euro, from $1.5588 late Thursday. The dollar decline on Thursday versus the euro came after comments from ECB President Trichet, which suggested that the European Central Bank might increase interest rates next month.
- Against the Japanese yen, the greenback traded at Y105.15 per U.S. dollar on Friday from Y105.93 late Thursday, while the pound sterling was at $1.9704 per pound from $1.9582 late Thursday.
- The dollar index fell to a two-week low reading of 72.40 on Friday.
- Highlight: Switzerland
-During Friday afternoon trading, the U.S. dollar fell approximately 1.73% against the Swiss franc to 1.0202 francs per U.S. dollar, or its lowest levels since April 24, 2008, as reports from the Swiss Institute Business Cycle Research downward revised the forecasted growth for Switzerland this year to 2% from 2.1%. The Swiss franc has appreciated 9.96% year-to-date against the U.S. dollar.
- The Dow ended down -428.51 or -3.39% for the week
- Friday, the Dow closed at 12,209.81, down -394.64 or -3.13%
- The Dow is Negative YTD down -7.95%
- The Dow is off by -1,954.72 or -13.80% from the market peak on October 9th of 14,164.53
- The NASDAQ ended down -48.10 or -1.91% for the week
- Friday, the NASDAQ Composite closed at 2,474.56, down -75.38 or -2.96%
- The NASDAQ is Negative YTD down -6.70%
- The NASDAQ is off by -384.56 or -13.45% from the market peak on October 31 of 2,859.12
- S&P 500
- The S&P 500 ended down -39.70 or -2.83% for the week
- Friday the S&P 500 closed at 1,360.68, down -43.37 or -3.09%
- The S&P is Negative YTD down -7.33%
- The S&P is off by -204.47 or -13.06% from the market peak on October 9th of 1,565.15
S&P Sector Performance for the week ending Friday, June 6, 2008:
S&P 500 Materials Sector (.GSPM) Down -0.78 or -0.28%
S&P 500 Energy Sector (.GSPE) Down -1.90 or -0.30%
S&P 500 Utilities Sector (.GSPU) Down -4.13 or -1.98%
S&P 500 Consumer Staples Sector (.GSPS) Down -5.88 or -2.00%
S&P 500 Information Technology Sector (.GSPT) Down -8.32 or -2.12%
S&P 500 Health Care Sector (.GSPHC) Down -8.54 or -2.29%
S&P 500 Telecomm Services Sector (.GSPTS) Down -4.97 or -3.22%
S&P 500 Consumer Discretionary Sector (.GSPD) Down -8.70 or -3.41%
S&P 500 Industrials Sector (.GSPI) Down -15.02 or -4.34%
S&P 500 Financials Sector (.GSPF) Down -20.34 or -6.11%
S&P Top 10 Performers for the week ending Friday, June 6, 2008:
National Semiconductor Corp (NSM) Up 2.69 or 12.78%
Jabil Circuit Inc (JBL) Up 1.35 or 10.61%
The Manitowoc Company Inc (MTW) Up 3.65 or 9.38%
Advanced Micro Devices Inc (AMD) Up 0.55 or 7.99%
McGraw-Hill Companies Inc (MHP) Up 2.87 or 6.92%
Monsanto Co (MON) Up 8.36 or 6.56%
Chesapeake Energy Corp (CHK) Up 3.28 or 5.99%
Hewlett-Packard Co (HPQ) Up 2.67 or 5.94%
CONSOL Energy Inc (CNX) Up 5.79 or 5.93%
El Paso Corp (EP) Up 1.16 or 5.93%
S&P 10 Worst Performers for the week ending Friday, June 6, 2008:
Ambac Financial Group Inc (ABK) Down -0.78 or -24.92%
MBIA Inc (MBI) Down -1.52 or -21.84%
Washington Mutual Inc ( WM) Down -1.49 or -16.52%
Wachovia Corp (WB) Down -3.67 or -15.42%
National City Corp (NCC) Down -0.89 or -15.24%
Centex Corp (CTX) Down -2.77 or -14.71%
Tyson Foods Inc (TSN) Down -2.66 or -14.12%
Precision Castparts Corp (PCP) Down -16.80 or -13.91%
Goodrich Corp (GR) Down -8.92 or -13.76%
Regions Financial Corp (RF) Down -2.37 or -13.30%
Dow Top Performers for the week ending Friday, June 6, 2008:
Hewlett-Packard Co (HPQ) Up 2.67 or 5.94%
Verizon Communications (VZ) Up 1.15 or 3.10%
Johnson and Johnson (JNJ) Up 0.84 or 1.29%
Wal-Mart Stores Inc (WMT) Up 0.63 or 1.09%
International Business Machines Corp (IBM) Up 0.74 or 0.60%
Chevron Corp (CVX) Up 0.35 or 0.35%
Procter & Gamble Co (PG) Up 0.10 or 0.15%
Home Depot Inc (HD) Down -0.18 or -0.66%
AT&T Inc (T) Down -0.32 or -0.83%
3M Company (MMM) Down -0.95 or -1.25%
Dow Worst Performers for the week ending Friday, June 6, 2008:
Bank Of America Corp (BAC) Down -3.51 or -10.32%
The Boeing Co (BA) Down -8.32 or -10.21%
American International Group Inc (AIG) Down -3.02 or -8.17%
Pfizer Inc (PFE) Down -1.57 or -8.04%
JPMorgan Chase and Co (JPM) Down -2.91 or -6.77%
General Motors Corp (GM) Down -0.88 or -5.15%
Citigroup Inc (C) Down -1.06 or -5.02%
The Coca Cola Co (KO) Down -2.83 or -4.83%
United Technologies Corp (UTX) Down -3.00 or -4.29%
McDonald's Corporation (MCD) Down -2.37 or -4.00%
Key Earnings next week:
Monday: Pall Corp (PLL)
Tuesday: PepBoys (PBY)
Thursday: Enersys (ENS), China Medical (CMED)
Economic Data next week:
Monday: Pending Home Sales
Tuesday: Trade Balance
Wednesday: EIA Crude Inventories, Treasury Budget
Thursday: Export/Import Prices, Retail Sales, Business Inventories
Friday: CPI, Consumer Sentiment Index-Michigan Univ.