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.
Crude Oil for October delivery nudged almost 1% for the week on fears that Tropical Storm Gustav could strengthen to a Category 3 hurricane and disrupt oil and gas installations in the Gulf of Mexico during Labor Day weekend. The Gulf accounts for about 25% of US crude production and almost 15% of its natural gas production.
**Initially crude jumped to an intraday high of $120.5/barrel on 8/28, but then eased, trading at lower levels on a pledge by the International Energy Agency (IEA) to aid with reserved stock piles in case of any damages caused by Gustav to the U.S. oil and gas facilities. Crude is still down 7.3% month to date on diminishing global and U.S demand, and off ~$32 or -22% from its all-time record high of $147.27/barrel set on 7/11/08.
Natural Gas for September delivery finished up 7.03% for the week buoyed by Tropical Storm Gustav as it reached an intraday high of $8.777/million BTU’s on 8/27. Yet the new-front contract for October settled lower on Fridayat $7.943/million BTU’s as the Energy Information Administration reported an increase of 102 billion cubic feet in domestic natural gas reserves.
Orange Juice for November delivery edged up 4.6% for the week on worries about Tropical Storm Gustav also potentially making a landfall in Florida and damaging the orange crops. The frozen concentrate front-contracts edged up 1.25 cents to settle at $1.1265/lb on Friday.
Currencies: The US dollar was poised for its biggest monthly gain since October 1992, helped by upbeat economic news for the week.
The dollar index traded at 77.31 late Friday, advancing 5.58% for the month, marking its biggest percent increase since January 1997.
Ahead of the long holiday weekend in the US, the euro was at $1.4668 on Friday, from $1.4705 late Thursday. Euro-zone data showed a less-than-expected inflation rate; however, earlier comments in the week from policy makers raising concerns over inflation levels in the euro-zone led investors to expect an increase in interest rates in the near future. The euro was on track for its biggest monthly decline since January 1997, down 5.98% for the month.
Rising concerns over the economic health in the United Kingdom, led the pound to depreciate over 8% in August, its sharpest monthly-percentage decline in over 15 years. The pound sterling traded at $1.8223 on Friday, from $1.8294 late Thursday.
Against the Japanese yen, the US dollar was at 108.81 yen per dollar on Friday, from 109.48 yen late Thursday, up 0.85% for the month.
The Australian dollar fell almost 9% in the month of August, increasing expectations that the rate between the US and Australia could narrow. The Reserve Bank of Australia has hold interest rates at 7.25% since March 4, 2008.
- The Dow ended down -84.10 or -0.72% for the week
- Friday, the Dow closed at 11,543.96, down -171.22 or -1.46%
- The Dow is Negative YTD down -12.97%
- The Dow is off by -2,620.57 or -18.50% from the market peak on October 9th of 14,164.53
- The NASDAQ ended down -47.19 or -1.95% for the week
- Friday, the NASDAQ Composite closed at 2,367.52, down -44.12 or -1.83%
- The NASDAQ is Negative YTD down -10.74%
- The NASDAQ is off by -491.60 or -17.19% from the market peak on October 31 of 2,859.12
- S&P 500
- The S&P 500 ended down -9.37 or -0.73% for the week
- Friday the S&P 500 closed at 1,282.83, down -17.85 or -1.37%
- The S&P is Negative YTD down -12.64%
- The S&P is off by -282.32 or -18.04% from the market peak on October 9th of 1,565.15
S&P Sector Performance for the week ending Friday, August 29, 2008:
S&P 500 Financials Sector (.GSPD) Up 8.50 or 3.07%
S&P 500 Telecomm Services Sector (.GSPTS) Up 1.15 or 0.88%
S&P 500 Industrials Sector (.GSPHC) Down -1.13 or -0.36%
S&P 500 Consumer Discretionary Sector (.GSPT) Down -1.25 or -0.52%
S&P 500 Utilities Sector (.GSPI) Down -1.01 or -0.53%
S&P 500 Materials Sector (.GSPS) Down -1.42 or -0.58%
S&P 500 Energy Sector (.GSPM) Down -3.63 or -0.65%
S&P 500 Health Care Sector (.GSPU) Down -7.42 or -1.92%
S&P 500 Consumer Staples Sector (.GSPE) Down -5.84 or -1.97%
S&P 500 Information Technology Sector (.GSPF) Down -11.13 or -3.01%
S&P Sector Performance for month ending, August 29, 2008:
S&P 500 Consumer Discretionary Sector (.GSPT) Up 15.78 or 7.03%
S&P 500 Telecomm Services Sector (.GSPTS) Up 4.54 or 3.57%
S&P 500 Consumer Staples Sector (.GSPE) Up 7.11 or 2.51%
S&P 500 Information Technology Sector (.GSPF) Up 7.1 or 2.02%
S&P 500 Health Care Sector (.GSPU) Up 6.44 or 1.73%
S&P 500 Industrials Sector (.GSPHC) Up 5.17 or 1.68%
S&P 500 Energy Sector (.GSPM) Down -4.69 or -0.84%
S&P 500 Financials Sector (.GSPD) Down -3.8 or -1.31%
S&P 500 Utilities Sector (.GSPI) Down -3.59 or -1.85%
S&P 500 Materials Sector (.GSPS) Down -7.03 or -2.82%
S&P 10 Top Performers for the week ending Friday, August 29, 2008:
Freddie Mac (FRE) Up 1.70 or 60.50%
MBIA Inc (MBI) Up 6.02 or 59.02%
Fannie Mae (FNM) Up 1.84 or 36.80%
MGIC Investment Corp (MTG) Up 1.44 or 20.66%
Titanium Metals Corp (TIE) Up 2.22 or 18.21%
Sovereign Bancorp Inc (SOV) Up 1.17 or 13.78%
KB Home (KBH) Up 2.47 or 13.48%
SLM Corp (SLM) Up 1.85 or 12.62%
Merrill Lynch & Co Inc (MER) Up 3.13 or 12.41%
Tesoro Corp (TSO) Up 2.03 or 12.29%
S&P 10 Top Performers for the month ending Friday August 29, 2008:
MBIA Inc (CCU ) Up 10.29 or 173.52%
Advanced Micro Devices Inc (IACI) Up 2.08 or 49.41%
MGIC Investment Corp (CZN) Up 2.01 or 31.41%
Polo Ralph Lauren Corp (MBI) Up 16.71 or 28.24%
Titanium Metals Corp (AMD) Up 3.15 or 27.98%
JC Penney Company Inc (MTG) Up 8.14 or 26.40%
Dillards Inc (RL) Up 2.66 or 26.31%
Limited Brands Inc (TIE) Up 4.31 or 26.14%
Liz Claiborne Inc (JCP) Up 3.14 or 24.02%
CIT Group Inc (DDS) Up 1.83 or 21.58%
S&P 10 Worst Performers for the week ending Friday, August 29, 2008:
Dell Inc (DELL) Down -3.54 or -14.01%
Darden Restaurants Inc (DRI) Down -4.28 or -12.75%
Broadcom Corporation (BRCM) Down -3.36 or -12.25%
Big Lots Inc (BIG) Down -3.89 or -11.63%
LSI Corp (LSI) Down -0.76 or -10.26%
Sun Microsystems Inc (JAVA) Down -1.00 or -10.00%
Micron Technology Inc (MU) Down -0.45 or -9.59%
Tyson Foods Inc (TSN) Down -1.49 or -9.31%
Expedia Inc (EXPE) Down -1.68 or -8.69%
Wendy's International Inc (WEN) Down -2.26 or -8.52%
S&P 10 Worst Performers for the month ending Friday, August 29, 2008:
Freddie Mac (FRE) Down -3.66 or -44.80%
Fannie Mae (FNM) Down -4.66 or -40.52%
Biogen Idec Inc (BIIB) Down -18.83 or -26.99%
Washington Mutual Inc ( WM) Down -1.28 or -24.02%
Constellation Energy Group Inc (CEG) Down -16.45 or -19.78%
American International Group Inc (AIG) Down -4.56 or -17.50%
Whole Foods Market Inc (WFMI) Down -3.86 or -17.41%
Harman International Industries Inc (HAR) Down -7.14 or -17.34%
AK Steel Holding Corp (AKS) Down -10.89 or -17.15%
United States Steel Corporation (X) Down -27.29 or -17.02%
Dow Top Performers for the week ending Friday, August 29, 2008:
American International Group Inc (AIG) Up 1.62 or 8.15%
Citigroup Inc (C) Up 0.85 or 4.69%
Bank Of America Corp (BAC) Up 0.93 or 3.08%
AT&T Inc (T) Up 0.82 or 2.63%
American Express Co (AXP) Up 0.89 or 2.29%
JPMorgan Chase and Co (JPM) Up 0.82 or 2.18%
Merck & Co Inc (MRK) Up 0.40 or 1.13%
Caterpillar Inc (CAT) Up 0.46 or 0.65%
The Walt Disney Co (DIS) Up 0.15 or 0.47%
Home Depot Inc (HD) Up 0.01 or 0.04%
Dow Top Performers for the month ending Friday, August 29, 2008:
Home Depot Inc (HD) Up 3.29 or 13.81%
Merck & Co Inc (MRK) Up 2.77 or 8.42%
The Boeing Co (BA) Up 4.45 or 7.28%
American Express Co (AXP) Up 2.56 or 6.90%
The Walt Disney Co (DIS) Up 2 or 6.59%
Procter & Gamble Co (PG) Up 4.29 or 6.55%
Microsoft Corp (MSFT) Up 1.57 or 6.10%
Hewlett-Packard Co (HPQ) Up 2.12 or 4.73%
AT&T Inc (T) Up 1.18 or 3.83%
McDonald's Corporation (MCD) Up 2.26 or 3.78%
Dow Worst Performers for the week ending Friday, August 29, 2008:
The Coca Cola Co (KO ) Down -2.30 or -4.23%
General Motors Corp (GM) Down -0.44 or -4.21%
General Electric Co (GE ) Down -1.02 or -3.50%
Pfizer Inc (PFE) Down -0.64 or -3.24%
Intel Corp (INTC) Down -0.62 or -2.64%
Procter & Gamble Co (PG) Down -1.84 or -2.57%
International Business Machines Corp (IBM) Down -3.20 or -2.56%
McDonald's Corporation (MCD) Down -1.42 or -2.24%
Chevron Corp (CVX) Down -1.78 or -2.02%
Microsoft Corp (MSFT) Down -0.55 or -1.98%
Dow Worst Performers for the month ending Friday, August 29, 2008:
American International Group Inc (AIG) Down -4.56 or -17.50%
General Motors Corp (GM) Down -1.07 or -9.67%
Bank Of America Corp (BAC) Down -1.76 or -5.35%
JPMorgan Chase and Co (JPM) Down -2.14 or -5.27%
International Business Machines Corp (IBM) Down -6.25 or -4.88%
ALCOA Inc (AA) Down -1.62 or -4.80%
General Electric Co (GE) Down -0.19 or -0.67%
Exxon Mobil Corp (XOM ) Down -0.42 or -0.52%
Wal-Mart Stores Inc (WMT) Down 0.45 or 0.77%
The Coca Cola Co (KO) Down 0.57 or 1.11%
Key Earnings next week:
Tuesday: Donaldson (DCI)
Wednesday: Staples (SPLS), Joy Global (JOYG), Hovnanian (HOV), H&R Block (HRB)
Thursday: Toll Brothers (TOL), Ciena Corp (CIEN), UTi Worldwide (UTIW)
Friday: National Semiconductor (NSM)
Economic Data next week:
Tuesday: Construction Spending, ISM Manufacturing Index
Wednesday: Factory Orders, Crude Inventories
Thursday: Chain Store Sales, Productivity and Costs, ISM Non-Manufacturing Survey
Friday: Employment Situation