For the week ending Friday, October 3, 2008, the major U.S. Indices declined steeply on continued uncertainties over the financial bailout / rescue plan, concerns in the credit markets and more economic deterioration.
- On Monday, stocks suffered massive sell-offs as the Dow and S&P posted their largest point declines in history, both shedding 778 and 104 points respectively. The NASDAQ Composite also closed down 199 points, its biggest one-day point decline since 5/23/00. All three major indices fell more than 7.3% for the week. The last time all 3 indices were down more than 7.3% in the same week was on 10/23/1987.
- The NASDAQ had the worst weekly performance amongst the three major indices, losing 10.81%, its biggest weekly drop since 11/10/2000. The S&P fell 9.38% for the week, marking the biggest weekly decline since 4/14/2000.
- The CBOE Volatility Index , soared to 20-year highs as it settled at 46.72 on Monday, its highest level since 1/8/1988.
- The Euro had its biggest weekly decline ever against the dollar, falling 5.5% as of 4PM EST.
- The Reuters/Jefferies CRB Index (.CRB) the price gauge of major commodities had its worst weekly decline in history (data tracked back to 1956), dropping 10.4% for the week. Prior to today, the biggest weekly percentage decline was on 3/21/08 when it fell 8.32%.
Next Week's Highlights: Earnings season begins - The markets will digest earning reports from major companies including Alcoa, Yum! Brands, Costco, Monsanto, Chevron, and General Electric. Federal Reserve Chairman Bernanke will speak at the National Association for Business Economics and FOMC Minutes will be released on Tuesday. Additional economic data that may also weigh on stock market include Pending Home Sales, International Trade, and Consumer Credit.
M&A, Deals, Corp Actions:
- Financial M&A intensified as Wells Fargo agreed to acquire Wachovia for $15.1 billion, superceding a government aided deal in which Citigroup attempted to buy Wachovia’s banking operations for $2.2 billion. Prior to the Wells Fargo announcement, Citigroup had proposed to buy a fraction of the firm with support from the Federal Deposit Insurance Corporation (FDIC), for which Citigroup agreed to give the FDIC a $12 billion stake in the form of preferred shares and warrants.
**Wells Fargo’s buy-out values Wachovia’s stock at $7/share, an 80% premium over its Thursday's closing price of $3.91. Shares of Wachovia rallied on Friday, but tumbled 38% for the week, while Wells Fargo and Citigroup finished down shares fell 7.37% and 8.93% respectively.
- Berkshire Hathaway’s Warren Buffett agreed to purchase $3 billion in GeneralElectric’s preferred stock, his second capital investment in financials in two weeks, after last week’s $5 billion deal for Goldman Sachs preferred shares.
**GE’s stock fell to a 52-week low on Wednesday at $21.65/share after the company also offered $12 billion in common stock in order to raise fresh capital amidst the continued credit market turmoil. Shares of GE dropped 14.6% for the week.
- Biotech giant Imclone Systems received an acquisition offer from Eli Lilly for ~$6.1 billion, or $70 / share, after declining countless offers from its small stakeholder Bristol-Myers Squibb. The latest unsolicited offer by Bristol-Myers included a purchase price of $62/share. Imclone shares edged higher 2.5% for the week on the possible merger.
- GameStop the world’s largest video game retailer announced it will acquire French leading game retailer Micromania for $700 million, seeking market share expansion in the France, as it currently operates 5,889 stores worldwide, excluding the French virtual game market. Shares of Gamestop had mild reaction to merger plans, as it slightly dropped 2.43% for the week.
- Sprint Nextel, has found potential private equity buyers for its Nextel business, including Cerberus Capital Management and NII Holdings, a digital wireless communication services company focused on Latin American markets, according to the Wall Street Journal. Sprint shares were down 17.8% for the week.
Other Market Moving News:
- Insurers were hit with massive sell-offs mid-week on the news that MetLife, Hartford Financial, Prudential could possibly face downgrades by rating agencies on exposure to bad debt that could lead to additional write-downs and erode firms' profits. Out of the three mentioned, Hartford’s stock experienced the worst weekly decline, sinking 51.6%, as MetLife and Prudential dropped 21.7% & 24% respectively.
- Regional Banks stocks tumbled on Monday after the House of Representatives rejected Congress’ $700 billion bailout package. Panic spread to smaller banks such as SovereignBank, KeyCorp, and National City Corp after investors feared that smaller banking entities could be potential victims of the credit crunch, despite the smaller banks’ reassurance of being well capitalized.
**National City’s stock fell to an all-time low of $1.25/share on Monday while Sovereign Bank fell to a 52-week low of $2.20/shares. The two recovered some of their losses but still shed 5.4% & 30.2%, respectively for the week.
- The Securities and Exchange Commission (SEC) extended its ban on short-selling which on more than 900+ financial companies after the original ban reached its expiration date on October 2. The SEC added new terms stating that the temporary halt on shorting practices will continue for 3 days after Congress passes the Senate & Congress approved legislation on $700 billion financial rescue package, and gave the ban a second deadline as of October 17th
- Home builder stocks fell on continued declines in housing prices. The S&P/Case-Shiller Index, the gauge of U.S home prices in 10-major metropolitan areas, experienced a record drop of 17.5% in July from the same period the previous year. The 10-major cities home price index which fell 21.1% below its market peak two years ago, sent shares of homebuilder Pulte Homes and DR Horton down by more than 19% for the week, while Hovnanian lost 13%.
Crude for November delivery shed 12% for the week, after seesawing between intraday lows/high ranging from $91.3 through $106.9/barrel. Crude settled lower on Friday at $93.88/barrel on larger-than-expected Energy Information Administration’s (EIA) weekly supply report, which showed an increase of 4.3 million barrels in oil stockpiles for the week of 9/26. The price of crude also ended down ~29% for September quarter ending amidst concerns about a global economic slowdown that has been pressuring oil demand.
Platinum for January 09 delivery fell to an almost 3-year low and traded below the $1000/ounce mark on Friday as it reached an intraday low of $956.2/ounce, its lowest level since December 2005. Platinum which closed on Friday at $965.8/ounce and down 36% year to date has fallen on dire automobile sector performance cutting into the demand for platinum.
**Lagging auto sales and a freeze in short-term lending have dipped into automakers profits with Ford (F), General Motors (GM), Toyota Motors (TM) and Daimler AG (DAI) warning on future profits. Shares of all four car manufacturers dipped 16%, 8%, 14%, and 25% respectively for the week.
***Automakers also had more credit crunch woes as September car sales slumped with Ford and Toyota Motors reporting steep declines of 35% and 32% in vehicles sales. General Motors (GM) fared slightly better as it reported September sales decline of 16% by providing incentive programs such as 0% financing and slashing up to $5000 in big trucks price tags.
Corn for December delivery fell to a 10-month low, and dipped to an intraday low of $4.53/bushel on Friday, a level not seen since 12/31/07. Corn was the worst grain performer, declining more than 16% for the week on bearish business forecasts from the agriculture sector.
**Shares of Fertilizer stocks such as Mosaic (MOS), Potash (POT), Agrium (AGU) plummeted 46%, 35% and 36% respectively for the week led by Mosaic’s reduction in its yearly guidance for phosphate sales volume amidst reduced global demand & higher inventory levels. Mosaic’s Q1 2009 earnings was also worst than expected, missing estimates by 29 cents/share.
Soybeans for November delivery dropped below $10/bushel on Thursday for this first time since 11/2007, touching an 11-month low. Soybeans fell 14.78% for the week closing at $9.92/bushel on Friday, amidst concerns of an ailing U.S economic health, and a stronger dollar in spite of earlier support from a strike against Argentina’s government farms.
Currencies: During Friday's afternoon trading session, the U.S. dollar edged lower against the euro, after the House of Representatives approved the $700 billion rescue package. An earlier report by the Labor Department indicated that U.S. non-farm payrolls declined for the ninth straight month and at the steepest rate in 5-1/2 years. However, the unemployment rate for September remained unchanged at 6.1%, which helped lift the greenback during the morning trading session.
- The dollar index was on track for its biggest weekly increase since 1992, with a gain of over 4% for the week. Friday afternoon, the dollar index was at 80.29, after hitting a 13-month high of 80.93 earlier in the day.
- In midday trading in New York, the euro was at $1.3858 versus the dollar, after falling as low as $1.3706, or its lowest level since September 2007. The European currency was on track for its worst weekly decline ever, down over 5% for the week.
** Comments from ECB President Trichet this week suggested that the first rate cut in over five years could be in sight, as inflationary risks ease and the financial market turbulence intensifies in the euro zone. During the ECB meeting on Thursday, the European Central Bank decided to maintain interest rates unchanged at 4.25%.
- The pound sterling traded at $1.7755 versus the greenback on Friday, from $1.7553 late Thursday. The pound sterling declined over 3.76% this week, marking its biggest weekly decline since September 1992.
- The Japanese yen was relatively unchanged trading at 105.21 yen per dollar on Friday, from 105.32 yen late Thursday, down 0.7% for the week.
- The Australian dollar had its worst weekly percent decline, falling over 7% against the greenback, since March 1983. Against the U.S. dollar, the Australian dollar traded at $0.7733 per U.S. dollar on Friday, from $0.7722 late Thursday.
- The Dow ended down -817.75 or -7.34% for the week
- Friday, the Dow closed at 10,325.38, down -157.47 or-1.50%
- The Dow is Negative YTD down -22.16%
- The Dow is off by -3,839.15 or -27.10% from the market peak on October 9th of 14,164.53
- The NASDAQ ended down -235.95 or-10.81% for the week
- Friday, the NASDAQ Composite closed at 1,947.39, down -29.33 or -1.48%
- The NASDAQ is Negative YTD down -26.58%
- The NASDAQ is off by -911.73 or -31.89% from the market peak on October 31 of 2,859.12
- S&P 500
- The S&P 500 ended down -113.78 or -9.38% for the week
- Friday the S&P 500 closed at 1,099.23, down -15.05 or -1.35%
- The S&P is Negative YTD down -25.14%
- The S&P is off by -465.92 or -29.77% from the market peak on October 9th of 1,565.15
S&P Sector Performance for the week ending Friday, October 3, 2008:
S&P 500 Consumer Staples Sector (.GSPE) Down -6.68 or -2.30%
S&P 500 Health Care Sector (.GSPU) Down -15.87 or -4.38%
S&P 500 Telecomm Services Sector (.GSPTS) Down -7.51 or -6.19%
S&P 500 Utilities Sector (.GSPI) Down -11.42 or -6.54%
S&P 500 Financials Sector (.GSPD) Down -31.29 or -10.97%
S&P 500 Consumer Discretionary Sector (.GSPT) Down -25.81 or -11.21%
S&P 500 Information Technology Sector (.GSPF) Down -36.70 or -11.21%
S&P 500 Industrials Sector (.GSPHC) Down -34.62 or -12.30%
S&P 500 Energy Sector (.GSPM) Down -67.51 or -13.00%
S&P 500 Materials Sector (.GSPS) Down -31.80 or -14.92%
S&P 10 Top Performers for the week ending Friday, October 3, 2008:
American International Group Inc (AIG) Up 0.71 or 22.54%
Huntington Bancshares Inc (HBAN) Up 1.39 or 14.90%
Constellation Energy Group Inc (CEG) Up 3.37 or 13.35%
Suntrust Banks Inc (STI) Up 4.14 or 8.20%
Campbell Soup Co (CPB) Up 2.00 or 5.31%
Procter & Gamble Co (PG) Up 2.18 or 3.17%
H and R Block Inc (HRB) Up 0.72 or 3.13%
Dean Foods Co (DF) Up 0.61 or 2.58%
Pfizer Inc (PFE) Up 0.34 or 1.82%
Biogen Idec Inc (BIIB) Up 0.73 or 1.47%
S&P 10 Worst Performers for the week ending Friday, October 3, 2008:
Hartford Financial Services Group Inc (HIG) Down -29.24 or -51.62%
General Growth Properties Inc (GGP) Down -7.38 or -43.28%
CF Industries Holdings Inc (CF) Down -35.30 or -38.46%
Wachovia Corp (WB) Down -3.79 or -37.90%
Massey Energy Co (MEE) Down -12.74 or -32.03%
CB Richard Ellis Group Inc (CBG) Down -4.43 or -31.92%
Terex Corp (TEX) Down -10.51 or -30.75%
Sovereign Bancorp Inc (SOV) Down -2.53 or -30.23%
Freeport-McMoRan Copper & Gold Inc (FCX) Down -18.96 or -29.71%
Deere & Co (DE) Down -16.09 or -29.08%
Dow Top Performers for the week ending Friday, October 3, 2008:
Procter & Gamble Co (PG) Up 2.18 or 3.17%
Pfizer Inc (PFE) Up 0.34 or 1.82%
Kraft Foods Inc (KFT) Up 0.15 or 0.46%
The Coca Cola Co (KO) Up 0.09 or 0.17%
Merck & Co Inc (MRK) Down -0.34 or -1.06%
Wal-Mart Stores Inc (WMT) Down -0.98 or -1.61%
Verizon Communications (VZ) Down -0.94 or -2.92%
Exxon Mobil Corp (XOM) Down -2.71 or -3.36%
Microsoft Corp (MSFT) Down -1.08 or -3.94%
Johnson and Johnson (JNJ) Down -3.24 or -4.67%
Dow Worst Performers for the week ending Friday, October 3, 2008:
American Express Co (AXP) Down -8.63 or -21.85%
Caterpillar Inc (CAT) Down -12.92 or -20.15%
ALCOA Inc (AA) Down -4.30 or -18.27%
General Electric Co (GE) Down -3.68 or -14.57%
International Business Machines Corp (IBM) Down -15.98 or -13.38%
Hewlett-Packard Co (HPQ) Down -4.81 or -10.06%
Home Depot Inc (HD) Down -2.65 or-10.02%
United Technologies Corp (UTX) Down -6.00 or -9.86%
Intel Corp (INTC) Down -1.89 or -9.84%
The Walt Disney Co (DIS) Down -3.21 or -9.80%
Key Earnings next week:
Tuesday: Alcoa (AA), Safeway (SWY), Yum! Brands (YUM)
Wednesday: Costco (COST), Monsanto (MON), Ruby Tuesday (RT)
Thursday: Infosystems (INFY), Chevron (CVX)
Friday: General Electric (GE), Host Hotels (HST)
Economic Data next week:
Tuesday: Consumer Credit, FOMC Minutes
Wednesday: Pending Home Sales, Crude Inventories
Thursday: Jobless Claims, Wholesale Inventories
Friday: Import & Export Prices, Trade Balance