Market 360: The Best and Worst of the Week for US Equities, Commodities, Currencies, and More
For the week and month ending Friday, August 29, 2008, the major U.S. Indices ended slightly lower for the week but up for the month. The markets had a volatile week, sinking first on housing price drops and an up-tick in oil prices, then rallying on better-than-expected GDP numbers, and finally falling to end the week on worse-than-expected personal income and spending data. The Dow hit a 200+ point rally on Thursday, its largest one day gain since 8/8. The NASDAQ led the indices to the downside this week, down nearly 2%. For the August close, the Dow, Nasdaq and S&P all finished up 1.5% or more, marking the best monthly gain since April for the Dow & S&P, and best month for the Nasdaq since May.
Next Week's Highlights: During the short Labor Day week, the markets will watch for any disruptions caused by Tropical Storm Gustav, as well as earnings from homebuilders Hovnanian & Toll Brothers. Staples, H&R Block, Ciena and National Semiconductor will also report. Economic data will include employment reports and the ISM Manufacturing Index.
M&A, Deals, Corp Actions:
Microsoft proposed to acquire the online survey solutions company Greenfield Online for an estimated $486 million in order to enhance its internet search and e-commerce business in Europe. The deal will be the first for the software giant after failing to acquire Yahoo for $47.5 billion earlier this year. Greenfield shares nearly reached the $17.5/share premium soon to be paid by Microsoft as it closed at $17.3 on Friday, and are up 7.1% for the week.
U.S. office equipment services and distributor IKON Office Solutions agreed to a buy-out offer from Japanese copier and printer maker Ricoh for $1.6 billion as the takeover will expand Ricoh’s market shares in the U.S. and Europe. Acquisition news lifted Ikon ‘s shares 11% for the week.
Defense contractor, SI International agreed to be acquired by the US business arm of private firm Serco Group for $423 million, adding $8 or 36% to its stock value for the week.
Canadian gas & oil driller Precision Drilling Trust announced a bid of $2 billion for U.S. drilling company Grey Wolf , creating one of the largest gas and oil rig firms in the U.S, with combined annual revenue of $1.8 billion. The deal comes a month after Grey Wolf rejected a merger proposal from well-servicing firm Basic Energy Services . Shares of PDS shed 0.9% and GW gained 1.4% for the week.
Other Market Moving News:
Shares of the U.S.'s largest bond insurer, MBIA Inc. and rivals Ambac Financial, MGIC Investments were boosted by MBIA’s agreement to reinsure $184 billion in municipal bonds, currently issued by Financial Guaranty Insurance Co.’ . The deal will earn MBIA $741 million in premiums and will add to its return on equity. MBI, ABK, and MTG stocks were amongst the S&P biggest winners, surging 59%, 35% and 21% respectively for the week.
Fannie Mae and Freddie Mac stocks spiked higher for the week, up 37% and 61% amidst hopes that the two mortgage giants might be able to avoid a bailout by Congress that would place its shareholders in peril. Fannie announced the replacement of several senior managers and hopes of cutting costs and conserving capital. However, it has been extremely rough for FRE and FNM to be out of the limelight in recent months as selling pressures have eroded their shares significantly, both down almost 85% for the year.
The pharmaceutical sector was disturbed by rather dire news from Amylin Pharmaceuticals after the company reported four more deaths among users of its diabetes drug Byetta, which it partners with Eli Lilly (LLY). Bristol-Myers Squibb postponed the commercialization of its blood thinner drugs after test results questioned its effectiveness from preventing a stroke. Shares of drug makers Amylin Pharmaceuticals, Eli Lilly and Bristol Myers sank 17%, 3% and 4% for the week.
S&P/ Case-Shiller Home Price Index showed continued deterioration in the housing sector as the closely watched gauge for the 10-major metropolitan area hit new lows, tumbling 17% in June from a year ago, its steepest decline in 21 years.
**The S&P/Case-Shiller report initially sent homebuilders stocks down, but shares of Toll Brothers, Centex Corp. , Pulte Homes, and Lennar Corp managed to recover from earlier losses, finishing up 7%, 5%, 6%, and 11% respectively for the week.
***Homebuilders stocks were sent higher after an optimistic statement from UBS investment bank noting that the sector will continue volatility in the short term for the next two or three month, but that it should pick up thereafter.
***Jim Cramer is also expecting a housing bottom to take place around the third quarter of 2009, citing the decline in home prices, less inventories due to stagnant home construction, amongst other factors such as lower mortgage rates if the nationalization of Freddie Mac and Fannie Mae were to occur.