For the week ending Friday, August 15, 2008, U.S. major Indices finished mixed, after the markets digested negative results including a surge in CPI, a decline in retail sales, and continued expansion in unemployment claims. The Nasdaq Composite prevailed amongst the major U.S. indices, as it edged up 1.59% for the week, marking its fifth week of gains. Nasdaq gains were led by bullish comments on Amazon (AMZN) which gained 7.3% for the week. The likelihood of the eurozone moving toward recession allowed for a stronger dollar against the euro, continued pressure on oil, and a positive impact on U.S. stocks as a potential safe haven.
Next Week's Highlights: Next week the markets will watch Tuesday’s Producer Price Index for more clues on inflation, and Housing Starts will give better guidance on the health of the housing sector. More retailers will be reporting earnings including Home Depot, Target, Lowe’s, as well as big tech names like Hewlett-Packard and Intuit.
M&A, Deals, Corp Actions:
Vishay Intertechnologies made a $1.6 billion bid for the power-management chip maker International Rectifier Corp. in a deal that will offer Vishay further expansion in the power management industry. IRF shares soared 21% for the week.
CVS Caremark announced an acquisition of smaller rival Long Drug Stores for $2.6 billion in order to tackle the fast-growing prescription markets in California and Hawaii. The deal will add an additional 521 Long stores to CVS. Upon completion of merger, the firm will run 6,800 drugstores in 41 states, including the District of Columbia. Shares of LDG soared 37% for the week on deal news.
Japan's biggest bank, Mitsubishi UFJ Financial Group offered to acquire California-based UnionBanCal Corp for a revised $3 billion, in a deal that will allow the Japanese bank to obtain greater presence in the U.S. banking sector. ADRs of Mitsubishi declined 6.6% for the week, while shares of UB leapt 14.4%.
Waste Management Inc. raised its buy-out offer by almost 10% to $6.73 billion from its previous offer on 7/14 for rival firm Republic Services due to conflicts of interest by RSG, who in turn, agreed to acquire Allied Waste in late June for $6.24 billion. The new offer can rebut Republic’s own unsolicited bid for Allied Waste. Shares of trash haulers WMI and RSG declined 3.4% and 4.9%, respectively for the week.
Other Market Moving News:
General Motors shares rallied 11.5% for the week as the company is seeking to reconfigure its automobile production, shifting away from large pick-up trucks and SUV’s for smaller, yet more fuel-efficient cars such as the Chevy Cruze line. GM, which has been struggling with liquidity, also announced it will slash its North American capacity by 500,000 vehicles in the next two years.
The S&P Financial Sector sagged 2.82% for the week as shares of financial companies Lehman Brothers and Goldman Sachs were downgraded due to expectations of weakness in the firms’ financials and further write-downs.
**Bank of America is another financial stock that had a stormy week, as the company is bound by legal regulatory proceedings on behalf of recently acquired mortgage lender Countrywide. BAC completed the purchase of Countrywide on 7/01 for $2.5 billion, and will have to face Countrywide’s lawsuits related to mortgage delinquencies.
**Lehman was amongst the biggest losers in the S&P Financials shedding 13.2% for the week, followed by GS which fell 7.3% & BAC down 4.8%.