For this Green Week ending, April 25, 2008 the US Markets ended the week slightly to the upside. The relatively flat performance was driven by a comeback in the dollar, a streak of records for crude oil, better than expected jobless claims, 26-year low consumer sentiment, mixed earnings, and a 10 point victory for Hillary Clinton in the Pennsylvania Democratic primary.
Next Week: Look for deal news this weekend as Microsoft's ultimatum date to Yahoo arrives. Wednesday will bring big economic news with a 25 bps rate cut expected at the FOMC meeting, and the report on Gross Domestic Product. Key earnings for the week include Disney, Verizon, Exxon, and General Motors.
Highlights:
- Earnings:
- Tech:
- Microsoft third quarter net income fell by 11% from a year earlier led by $1 billion in deferred revenue from its delayed launch of operating system Vista. MSFT beat EPS estimates by 5 cents/share, yet shares were down 0.57% for the week.
- Apple swung to a second quarter profit of $1.05 billion, up 36% from same quarter a year ago based on strong Macintosh sales. Apple shares climbed 5.40% for the week.
- -Yahoo 1Q earnings topped analyst expectations by 2 cents / share as net income rose to $542 million on gains from its ownership stake in Alibaba.com. However, quarterly results had no impact on Microsoft’s bid for Yahoo.
- AT&T first quarter net income rose 22% on strong wireless growth, due to strong gains from Apple’s iPhone subscribers. The company shares were up 2.85% for the week.
- Amazon reported better than expected first quarter net income of $143 million boosted by continued international expansion.
- Netflix shares dropped about 20% on Tuesday when company reported first quarter net income increase of 35%, but warned that digital downloads will rot their earnings for the year. Netflix shares were down 11.93% for the week.
- Financials:
- Bank of America reported worse than expected earnings, missing estimates by 18 cents, as first quarter profit fell 77% driven by weakness in home-equity loans.
- Ambac Financial’s stock lost almost half its value on Wednesday and ended down ~43% for the day, after the company swung to a net loss of $1.66 billion for the first quarter on bonds backed by bad mortgages. Other bond insurers such as MBIA’s (MBI) stock declined 33.81% on Ambac’s negative results.
- National City , a smaller regional bank, said it would lower its dividend payout after the company posted a loss of $171 million for the first quarter. NCC announced a $7billion infusion of capital. Shares of NCC fell more than 27% after earnings announcement on Monday.
- American Express first quarter net income fell 6.2% led by bad loans and rising delinquencies, yet spending on its credit card rose 14% for the period. Shares rose 4.92% for the week.
- Pharma:
- Novartis reported a surprise net profit increase of 6.8% in the first quarter driven by strong sales of key brands Diovan and Gleevec as well as a weak dollar. Shares of NVS were up 5.88% for the week.
- Merck first quarter net income nearly doubled to $3.3 billion and beat estimates by 3 cents/share/share due to gains from its partnership with AztraZeneca. Shares of Merck increased 2.41% for the week.
- Consumer Discretionary:
- McDonald’s reported a 24% rise in 1Q net income, and beat analysts’ estimates by 11 cents/share on strong global sales and a weak dollar. The company also stated that U.S. same-store sales in March declined; nonetheless, shares of McDonald’s were up 2.35% for the week.
- Starbucks lowered its second quarter earnings forecast on Wednesday and cited that their sales dragged due to a slowdown in the economy. Shares shed 13.24% for the week.
- Industrials:
- DuPont reported better than expected net income of $1.19 billion, beating estimates by 3 cents/share after the company benefited from a weak dollar and strong demand from its agricultural products, which now represent 25% of its business. Slowing demand in the U.S weighed on its stock price as it fell 4.11% for the week.
- Potash first quarter earnings nearly tripled with net income of $566 million on surging demand and high prices for fertilizers. Company also raised earning guidance for 2008, and month to date stock is up 33.42%.
- Ford reported 1Q net income of $100 million for its first profitable quarter since the second quarter of last year amidst cost reduction in the U.S and strong profits in Europe. Thursday’s stock gain of 11.70% marked the largest percentage gain since 11/21/02.
- Whirlpool first quarter net income dropped 20% amid weak U.S. sales and rising cost. The company stock was down 6.84%.
- Boeing first quarter earnings swelled by 38% to $1.21 billion. Boeing led the Dow on Wednesday as shares rose 4.49% for the day.
- Airlines:
- UAL Corp plummeted on Tuesday about 37% after the company announced a first quarter net loss of $537 million, its biggest loss since emerging from bankruptcy in 2006, primarily due to a 62% increase in fuel cost.
**Major U.S airlines Continental, Delta, Northwest, United and US Airways declared new fees on for checking second bags to offset the rise in jet fuel cost. Consequently, the AMEX Airline Index (.XAL) closed at a new all-time low of $20.51 and fell 12.35% for the day. The Airline Index is down about 38% year to date. - M&A:
- GlaxoSmithKline (GSK) agreed to buy Sirtris Pharmaceuticals (SIRT) for $720 million in hopes to create treatments targeting aging related diseases. Shares of Sirtris skyrocketed 81.93% after the news on Wednesday.
- Liberty Mutual Group agreed to acquire Safeco (SAF) for $6.2 billion in a deal that will make Liberty the country’s 5th biggest P&C Insurer. Shares of Safeco jumped 46% after the merger news on Wednesday.
- Triarc (TRY), the parent company of Arby’s, agreed to buy Wendy’s (WEN) for $2.34 billion in order to pursue brand global expansion and focus on breakfast meals. Wendy’s also reported that first quarter earnings declined 72% to $4.14 million. Shares of Wendy’s were up 7.33% for the week on merger deal.
- Blue Coat Systems (BCSI) and Packeteer (PKRT) stocks' rose 11.79% and 13.11%, respectively for the week, after Packeteer announced its acquisition of Blue Coat Systems for $268 million in hopes to expand its network.
- Corporate Actions:
- Intrepid Potash Inc (IPI) raised $960 million and sold well above the initial offered price of $32/share as shares soared about 58% for the day due to the high demand for crop fertilizers worldwide.
- American Water Works (AWK) had a slow opening on Wednesday as its shares closed down below the initial offered price of $21.50/share and ended down 4% at a closed price of $20.6.
- Economic Data:
- The Univ. of Michigan Consumer Sentiment Index fell in April to 62.6, its lowest reading since March 1982 when it hit 62.0.
- Existing Home Sales fell by 2.0% in March to an adjusted annual rate of 4.93 million units and showed a continued housing slump.
- New Homes Sales sank 8.5% in March to an annual rate of 526,000, the lowest sales level since October 1991, suggesting no signs of improvement in the housing markets.
- Mortgage Bankers’ Purchase Applications Index fell 6.4% for the week of 4/18 as the borrowing cost on the 30-year fixed mortgage increased by 0.30% to 6.04%.
- Durable Goods Orders for big-ticket items dropped 0.3% in March for the third consecutive month, and was worse than economists had expected. Weakness in durable orders was led by low demand in motor vehicles.
- Initial Jobless Claims came in better than expected as claims fell by 33,000 in the week ending 4/19. Economists expected an increase of 3,000 new claims.
- Commodities:
- Crude Oil contracts had six straight days of record intraday highs from 4/15-4/22 with an all-time high of $119.90/barrel reached on 4/22. Oil pulled back later in the week with the rise of the dollar but then rose again on Friday with new violence in the Persian Gulf. Events like the pipeline attacks in Nigeria, a decline in oil production in Mexico, and a Scottish refinery strike, threatened crude oil production and helped drive crude oil prices. Crude oil June contracts finished slightly up 2.03% for the week.
**AAA reported that the average retail gas price hit a new record high of $3.577/gal as of 4/25. Diesel also hit a new record high at $4.233/gal as of 4/25. - -RBOB gasoline May futures settled at three new record highs on 4/22, 4/23 & 4/25, and had an all-time high of $3.0735/gal on 4/25 as gasoline edged higher 2.15% for the week.
- Heating Oil May contracts reached an all-time high of $3.35 during intraday trading on 4/22, but receded to lower levels and finished up a slight 0.32% for the week.
- Rough Rice also hit record highs, as July contracts hit an all-time high of $24.85/hundredweight on Wednesday due to supply worries. Concerns reached the U.S. as wholesale clubs like Costco and Sam’s Club began limiting the sales of grains products to customers. July rice futures rose 1.98% for the week.
- Soybean and Wheat July Futures ended down for the week, 2.90% and 7.85%, respectively, amidst a stronger dollar and profit taking from traders.
- Currencies:
- The Dollar Index, advanced 1.11% for the week. Friday, the greenback rallied against the euro and yen as investors anticipate next week’s Federal Reserve decision on interest rates.
- During midday trading on Friday, the euro continued losing ground against the greenback to $1.5633, or 2.45% lower from an all-time high of $1.6017 recorded on Tuesday this week.
**The greenback appreciated against the euro helped by a bigger than expected drop in business sentiment in Germany, along with analysts’ expectations that the European Central Bank might be forced to cut interest rates to offset weak economic data. - The pound sterling traded at $1.9853 /pound on Friday morning on news that retail sales fell and on a sharp decline in manufacturing orders in the United Kingdom.
**The pound sterling is down 2.67% percent from its highest intraday price this year, $2.0397/pound, reached in March 14. - The dollar appreciated 0.67% to 104.35 against the yen during midday Friday. The greenback has appreciated 8.36% from its over-a-decade intraday low of 96.15 yen recorded in March 17, 2008.
- The Canadiandollar depreciated 1.26% for the week to 1.0170 per U.S. dollar on Friday, following Tuesday’s news that the Canadian Central Bank cut interests rates by 50 basis points to 3% in an effort to prevent declining exports to the United States from driving down Canadian economic growth.
**Canada’s Central Bank has cut interest rates by 150 basis points since December. - Highlights: Brazil & Israel
- The Brazilian real, which is trading at a nine-year high against the dollar, has appreciated 7% year-to-date against the greenback to 1.6601 real/dollar. The real has appreciated as investors seek to benefit from the high yields offered in Brazil. Last week, Brazil’s Central Bank announced a 50-point increase of its overnight lending rate to 11.75%. The rate increase is the first in three years.
- The Israeli shekel traded at 3.4826 per U.S. dollar, depreciating 0.83% for the week, ahead of next week’s monthly decision on interest rates, which are expected to remain unchanged at 3.25%. The Bank of Israel has cut rates twice by 50 basis points in a row. The Israeli currency has appreciated 9.61% year-to-date against the U.S. dollar.
Market Stats:
- Dow:
- The Dow ended up 42.50 or 0.33% for the week
- Friday, the Dow closed at 12,891.86 up 42.91 or 0.33%
- The Dow is Negative YTD down -2.81%
- The Dow is off by -1,272.67 or -8.98% from the market peak on October 9th of 14,164.53
- NASDAQ:
- The NASDAQ ended up 19.96 or 0.83% for the week
- Friday, the NASDAQ Composite closed at 2,422.93 down -5.99 or -0.25%
- The NASDAQ is Negative YTD down -8.65%
- The NASDAQ is off by -436.19 or -15.26% from the market peak on October 31 of 2,859.12
- S&P 500
- The S&P 500 ended up 7.51or 0.54% for the week
- Friday the S&P 500 closed at 1,397.84 up 9.02 or 0.65%
- The S&P is Negative YTD down -4.80%
- The S&P is off by -167.31or -10.69% from the market peak on October 9th of 1,565.15
S&P Sector Performance for the week ending Friday, April 25, 2008:
- S&P 500 Telecomm Services Sector (.GSPTS) Up 5.13 or 3.61%
- S&P 500 Financials Sector (.GSPF) Up 7.47 or 2.11%
- S&P 500 Consumer Discretionary Sector (.GSPD) Up 2.26 or 0.89%
- S&P 500 Information Technology Sector (.GSPT) Up 2.98 or 0.80%
- S&P 500 Health Care Sector (.GSPHC) Up 1.64 or 0.45%
- S&P 500 Industrials Sector (.GSPI) Up 1.28 or 0.37%
- S&P 500 Consumer Staples Sector (.GSPS) Down -1.37 or -0.47%
- S&P 500 Utilities Sector (.GSPU) Down -1.72 or -0.83%
- S&P 500 Energy Sector (.GSPE) Down -5.28 or -0.84%
- S&P 500 Materials Sector (.GSPM) Down -2.42 or -0.88%
S&P Top 10 Performers for the week ending Friday, April 25, 2008:
Safeco Corp (SAF) Up 19.61or 42.18%
LSI Corp (LSI) Up 1.16 or 23.11%
Broadcom Corporation (BRCM) Up 4.92 or 21.33%
Sprint Nextel Corp (S) Up 1.24 or 18.59%
Autodesk Inc (ADSK) Up 6.11or 18.36%
Tenet Healthcare Corp (THC) Up 0.75 or 13.79%
The Western Union Co (WU) Up 2.50 or 12.16%
CB Richard Ellis Group Inc (CBG) Up 2.51 or 11.81%
Wendy's International Inc (WEN) Up 2.93 or 11.54%
Hasbro Inc (HAS) Up 3.44 or 10.90%
S&P 10 Worst Performers for the week ending Friday, April 25, 2008:
Ambac Financial Group Inc (ABK) Down -2.12 or -35.45%
MBIA Inc (MBI) Down -3.20 or -24.54%
National City Corp (NCC) Down -2.01 or -24.13%
CIT Group Inc (CIT) Down -2.72 or -20.15%
First Horizon National Corp (FHN) Down -2.31 or -17.69%
Sovereign Bancorp Inc (SOV) Down -1.64 or -17.65%
BJ Services Co (BJS) Down -4.93 or -14.84%
Meredith Corp (MDP) Down -5.22 or -13.99%
Starbucks Corp (SBUX) Down -2.42 or -13.24%
Mattel Inc (MAT) Down -2.52 or -11.57%
Dow Top Performers for the week ending Friday, April 25, 2008:
The Boeing Co (BA) Up 6.18 or 7.86%
General Motors Corp (GM) Up 1.25 or 6.21%
Citigroup Inc (C) Up 1.49 or 5.93%
American Express Co (AXP) Up 2.24 or 4.92%
JPMorgan Chase and Co (JPM) Up 2.03 or 4.44%
Home Depot Inc (HD) Up 1.10 or 3.84%
The Walt Disney Co (DIS) Up 1.03 or 3.29%
AT&T Inc (T) Up 1.07 or 2.85%
Verizon Communications (VZ) Up 1.01 or 2.80%
Merck & Co Inc (MRK) Up 0.96 or 2.41%
Dow Worst Performers for the week ending Friday, April 25, 2008:
3M Company (MMM) Down -5.08 or -6.13%
E I du Pont de Nemours and Co (DD) Down -2.14 or -4.11%
Caterpillar Inc (CAT) Down -3.03 or -3.55%
Exxon Mobil Corp (XOM) Down -1.54 or -1.64%
Hewlett-Packard Co (HPQ) Down -0.73 or -1.52%
ALCOA Inc (AA) Down -0.54 or -1.49%
American International Group Inc (AIG) Down -0.70 or -1.45%
The Coca Cola Co (KO) Down -0.78 or -1.30%
International Business Machines Corp (IBM) Down -1.32 or -1.06%
Procter & Gamble Co (PG) Down -0.62 or -0.92%
Key Earnings next week:
Monday: Verizon (VZ), Visa (V), Loews Corp (LTR)
Tuesday: Countrywide (CFC), Deutsche Bank (DB), MasterCard (MA), Valero (VLO)
Wednesday: Time Warner (TWC), Starbucks (SBUX), Procter & Gamble (PG), SAP AG (SAP),
Thursday: Exxon (XOM), Burger King (BKC), Metlife (MET)
Friday: Chevron (CVX), Duke Energy (DUK), Nortel (NTL)
Economic Data next week:
Tuesday: Consumer Confidence
Wednesday: ADP Employment, GDP, Crude Inventories, Employment Cost Index
Thursday: Personal Income & Spending, PCE Core Inflation, Construction Spending, ISM Index
Friday: Unemployment Rate, Factory Orders, Non-farm Payrolls