For the week ending Friday, August 22, 2008, the U.S. major Indices fell for the week on the unknown future of mortgage giants Freddie Mac and Fannie Mae, downbeat home construction July data, and soaring producer prices. The NASDAQ Composite performed the worst for the week, declining 1.54%, its steepest decline since Independence Day week. However, Friday was a positive day for the markets helped by a welcome speech by Federal Reserve Chairman Ben Bernanke and a pull back in the price of crude. The Dow had three days of triple-digit point gains & losses, netting to finish almost flat for the week.
Next Week's Highlights: Next week there will be lots of economic news that could impact the markets including Consumer Confidence and FOMC Minutes on Tuesday, Durable Goods on Wednesday, preliminary GDP on Thursday, and Personal Income & Spending on Friday. It will be a quiet week for earnings, with only a few companies reporting, including Dell, Sears, Dollar Tree, and Novell.
M&A, Deals, Corp Actions:
Chicago based insurance broker Aon Corp agreed to buy Britain’s reinsurance firm Benfield Group Ltd for an estimated $1.6 billion in a deal that will allow AON to expand its business operations abroad. Shares of AON edged up 1.1% for the week on merger news.
Ericsson and STMicroelectronics are creating a joint venture in order to pool their wireless chip-making business and gain competitive advantage over U.S rivals Qualcomm and Texas Instruments . The Swedish mobile maker-Ericsson will inject $1.1 billion into the venture, and will operate with 8,000 employees out of Geneva. American Depository Receipts (ADR) of Ericsson slightly finished up 2.14% for the week, while ADR’s of STM dropped ~0.5%
ArcelorMittal the world’s largest steel company announced it will acquire full ownership of iron ore miner-London Mining South America Ltd for approximately $810 million. The deal will give ArcelorMittal more control over raw material supplies and enable greater diversification in commodities. ADR’s of ArcelorMittal leapt 2.5% for the week on the acquisition news.
The American Defense & Aerospace Contractor, General Dynamics announced a $2.25 billion deal to acquire the Swiss air- service company Jet Aviation. The merger will offer General Dynamics global market opportunities since Jet Aviation currently operates in Europe, Middle East, Asia, as well as North America. Shares of General Dynamic finished down 1.5% for the week.
Other Market Moving News:
Financials took another beating, as the S&P 500 Financial Index dropped over 3% for its biggest weekly percentage decline since 7/11/08, and a second consecutive week of heavy losses.
**Government-Sponsored Agencies, Freddie Mac and Fannie Mae , led the losers’ pack, with Freddie Mac’s stock shedding more than half its value for the week, down ~52% to $2.81, and Fannie Mae sinking ~37% to $5. Fannie Mae’s stock reached an intraday low of $3.53 on 8/21, its lowest level since 6/30/1988, and Freddie Mac’s shares fell for the first time to an all-time intraday low of $2.26 on 8/21. The latest plunge in the companies’ stock prices came from investor fears that the two mortgage giants would need to recapitalize sooner rather than later, after a report came out on their inability to pay $223 billion in bonds by the end of the quarter.
**Lehman Brothers’ stock withered 10.9% for the week but rebounded 5% on Friday on takeover news from foreign investor Korea Development Bank and additional news that it’s seeking the sale of its asset-management division, including the Neuberger Berman unit to offset some of its losses related to the firm’s exposure in mortgage-related securities. Lehman shares flirted around its 52-week low of $12.02, reached on 7/15/08, as the stock touched an intraday low of $12.5 on 8/20 and is currently down almost 78% year to date.