For the week ending Friday, September 5, 2008, the U.S. markets ended in negative territory for the week after weak employment data and declines in auto and retail sales pointed to weaker consumer spending and a greater economic slowdown. The unemployment rate jumped to a 5-year high, soaring to 6.1%. On Thursday, the three major Indices fell back into bear market territory by dropping 20% from their market peaks set last fall. Both the Dow & Nasdaq Composite had their worst daily closes since July 26, with drops of more than 340 points for the Dow and 75 points for the Nasdaq. The Nasdaq is now on a 5-day losing streak.
Next Week's Highlights: Next week will be a relatively quiet week for earnings with just a few companies reporting including Campbell Soup, Lululemon Athletica, and Pep Boys. Economic data that the markets will focus on will include Pending Home Sales, Wholesale Trade, International Trade, the Producer Price Index (PPI), and Retail Sales. Tuesday watch for more possible crude oil swings as the Organization of Petroleum Exporting Countries (OPEC) may restrict output at its next member meeting in Vienna.
M&A, Deals, Corp Actions:
Samsung announced a possible buy-out of U.S. chipmaker Sandisk for an undisclosed acquisition offer. Analysts believe Samsung will purchase Sandisk for ~$3.2 billion. Shares of Sandisk rallied 22% for the week on merger news.
Altria revealed a merger plan to acquire chewing tobacco and wine manufacturer UST Inc in a deal valued at approximately $10 billion which will help Altria increase its overall presence in the tobacco industry. Shares of UST Inc surged 26% for the week and reached an all-time high of $67.84/share on Friday.
Coca Cola offered to buy Chinese beverage firm China Huiyuan Juice Group for $2.4billion or triple its stock price, marking the second largest acquisition for the world’s largest drink maker. The deal will broaden Coca Cola’s beverage portfolio abroad, and capture Huiyuan’s large market share, which currently represents 40% of the Chinese nectar & juice market. Coca Cola shares closed almost flat for the week, while Huiyuan’s stock more than tripled, to close at HK$4.14 on 9/3.
Japanese pharmaceuticals player, Shinogi & Co., announced it will purchase the smaller U.S. Atlanta-based cardiovascular drug maker Sciele Pharma Inc. for $1.42 billion in a deal that will help Shinogi gain additional distribution channels in the U.S pharmaceutical market. At a 61% premium of is previous closing price, shares of Sciele Pharma rallied 59.16% on Tuesday, after the acquisition news.
Chesapeake Energy agreed to a joint venture with the American unit of BP p.l.c . BP will take a $1.9 billion, or 25%, stake in CHK's Fayetteville Shale fields in Arkansas, thus concluding a second acreage deal with BP prior to its Oklahoma Arkoma Basin Woodford Shale asset deal in July. Shares of both, CHK and BP’s ADR took a downturn on falling crude prices, shedding 8% & 6% respectively for the week.
Other Market Moving News:
- Retail Chain sales slumped for the back-to-school shopping month of August. Discounters such as Wal-mart , BJ’s Wholesales , and Costco were amongst the few with gains of 3%, 15.4%, 9%, respectively for same store sales. Trendier discounter, Target, reported a same store sales decline of 2.1%, while luxury retailers’ sales such as Saks and Nordstrom also fell 5.9% and 7.9%. Some of the retailer shares with the sharpest decline for the week included BJ’s Whosales down 15%, Abercrombie & Fitch dropped 7% and Saks off 2%.
- Airline and automobile stocks took off for the week as crude slid to a 5-month low, hitting an intraday low of $105.13/barrel on 9/5. Shares of UAL Corp. , Northwest Airlines , Delta Corp , and General Motors surged 11%, 11%, 8%, and 7% respectively for the week on oil firms reporting minimal damages from Hurricane Gustav.
**August’s U.S. vehicle sales report offset some of the earlier gains from falling crude prices, as Ford posted a 26.5% drop in car sales from the prior year. Its SUV sales had the steepest decline, down by 53%. Ford cut its second-half production guidance by 50,000 cars. Ford stock’s fell ~1% for the week. General Motors’ August sales tumbled by 20.3%, despite consumer incentive programs, showing that US demand for vehicles continues to slump. Even one of the most popular fuel-efficient carmakers, Toyota ™, faced slow growth in U.S auto sales, with August sales falling by 9.4% from the previous year. American Depository Receipts (ADR) of Toyota failed to stay in the green, as it finished down 0.9% for the week.