For the week ending Friday, April 11, 2008 the US Markets ended the week in negative territory. There was not a lot of movement in the markets for most of the week, as the major indices traded on a mix of news including same store sales, record highs in oil, flight cancellations from major airlines, and disappointing first quarter results from Alcoa . The markets tumbled on Friday on General Electric's disappointing earnings. The NASDAQ Composite had its first negative week in 5 weeks. Friday's declines gave the Dow its first triple digit move in 8 sessions.
Next Week: Look to earnings from tech giants including Google (GOOG), Intel (INTC) and IBM (IBM). Predictions are that a merger agreement between Delta (DAL) and Northwest (NWA) will be reached.
Highlights:
Earnings:
- A huge earnings surprise from General Electric (GE) came in at 7 cents / share below analyst estimates due to weakness in its financial services business line. Shares of GE declined 14.67% for the week.
- Earnings season officially began with negative results from Alcoa (AA) as the company posted a decline of 54% in net income for the first quarter. Shares of Alcoa dropped 9.87% for the week.
- United Parcel Services (UPS) cut its guidance citing the strain on the U.S. consumer and higher fuel costs. Shares of UPS declined about 4.73% for the week. FedEx (FDX), also down on the news, shed 4.10% for the week.
- Genentech (DNA) beat first quarter estimates by 2 cents / share, as company net income rose by 12%. However, DNA was down 3.69% for the week.
- Bed Bath Beyond (BBBY) had better than expected results for fourth quarter earnings as it beat analyst’s forecast by 1 cent / share, yet same-store sales declined by 0.4%. BBBY was down 4.34% for the week.
Sectors:
- Airlines
- American Airlines (AMR) canceled more than 3000 flights this week on safety concerns over its aircrafts' wiring and combined with increases of fuel prices, shares fell 4.05% for the week.
- Renewed talks came out of a potential final merger agreement between Northwest (NWA) and Delta (DAL) for next week.
- Frontier Airlines (FRNT) filed for Chapter 11 bankruptcy protection and shares fell more than 69% on Friday.
- Retailers
- Discount retailers such as, Wal-mart (WMT), Costco (COST) and BJ’s Wholesale (BJ) experienced gains in same store sales of 0.7%, 7.0%, and 6.0% respectively for the month of March.
- Wal-Mart Stores (WMT) sales gains were due to strong international sales. WMT also increased first quarter earnings outlook citing a well-managed inventory level and fewer markdowns. Shares of WMT slightly traded up 0.74% for the week.
- Kohl's (KSS), JCPenney (JCP) and Gap (GPS) all had same-store sales declines in the double digits for the month of March. All had drops over 4% this week
- Linens 'n Things (privately held by Apollo Global Mgmt) is exploring Chapter 11.
- Technology
- Microsoft (MSFT) gave Yahoo an ultimatum and threatened it would lower its bid if Yahoo does not agree to the terms of the merger in three weeks.
- Yahoo (YHOO) unveiled a plan to combine its website with Time Warner’s (TWX) Internet portal AOL, and prompted Microsoft to reach out to News Corp. (NWS) about joining forces to buy Yahoo.
- Advanced Micro Devices (AMD) was 3.53% lower for the week after the company disclosed that it will cut 10% of its workforce and reduced its first quarter earnings forecast below analysts’ expectations.
- Garmin (GRMN) and TomTom, makers of personal navigation devices or PND's, were both downgraded due to uncertainty on pricing and profitability. Shares of GRMN were down 17.09% for the week.
- Financials
- Washington Mutual (WM) announced a $7 billion cash infusion from private equity group TPG Capital and other investors. Shares of WM soared on Monday about 29% after the news, but came down on Tuesday after company said it would cut 3,000 jobs and slashed its dividends. WM finished up 7.67% for the week.
- Citigroup (C) announced a new deal to offload about $12 billion in leveraged loans and bonds to a group of private equity firms, but Citigroup did not gain much on the news as shares dropped 2.99% for the week.
- Goldman Sachs (GS) CEO Lloyd Blankfein stated that the credit crisis is “closer to the end than the beginning”. Shares of GS were down 4.62% for the week.
- Lehman (LEH) shares plunged 9.49% for the week as the bank liquidated three investment funds with assets totaling $1 billion.
Corp Actions M&A:
- Novartis (NVS) announced its plan to acquire eye-care company Alcon (ACL) for about $11 billion. Shares of NVS negatively responded to the news as shares dropped 8.9% for the week.
- Japanese Takeda Pharmaceutical made an $8.8 billion bid to buy US biotech Millennium Pharmaceuticals (MLNM) on Thursday, which led to big gains at the Nasdaq as MLNM shares jumped about 50% for the day.
- PDL BioPharma (PDLI) announced a $502 million cash dividend and plans to spin off its biotechnology operations. PDL BioPharma shares finished the week up 23%.
- TriZetto Group (TZIX) is being acquired by private equity firm Apax Partners for $1.4 billion. TriZetto's shares rose 15% during Friday's trading session.
Economic Data:
- The Consumer Sentiment Index fell to a 26-year low and came at a reading of 63.2 for April.
- The Bank of England cut its key-lending rate by a quarter point to 5%, while the European Central Bank left its rate unchanged at 4.0%.
- FOMC (Federal Open Market Committee) Minutes meeting highlighted that the rate of real GDP for the first half of 2008 had to be revised down due to the continued credit crunch crisis, depressed housing sector, weaker labor market, and high energy costs weighing down on the consumer.
- Pending Home Sales Index (National Association Realtors) fell 1.9% for the month to 84.6 in February, showing additional weakness in the housing sector.
- Homebuilders such as Lennar (LEN), KB Home (KBH), and Pulte Homes (PHM) declined on negative home sales report and all shares declined above 11% or more for the week.
- Wholesale Trade showed signs of decline in demand for goods as inventories rose 1.1% in February.
- The U.S. trade deficit increased by 5.7% in February as consumer imports surpassed exports, while economists expected the deficit to shrink.
Commodities:
- Crude Oil May futures rallied and reached a record intraday high of $112.21 a barrel and a record close of $110.87 on 4/9 due to low inventories reports. Crude Supply fell by 3.2 million barrels in the week ending of April 4 as per EIA. Crude has gained 14.75% for the year.
**AAA as of 4/11 reported a new record high for the US average gasoline price at $3.365 per gallon.
**EIA as of 4/07 reported an average retail gasoline price of $3.332 a gallon. - Heating Oil for May delivery hit an all-time high of $3.3204 per gallon on 4/10, as global demand for the fuel.
- Natural Gas for May delivery hit an intraday high of $10.314 per million British thermal units on 4/10 following the news that a production facility was shut down in the U.S. Gulf of Mexico. Natural gas is up 6.21% for the week.
- Rough Rice for May delivery continued its upward trend as it reached a new record intraday high of $21.55 per hundredweight on 4/8 due low global supplies and rising Asian rice prices. Rice is currently up 50.88% for the year.
**Riots over food shortages broke out in Egypt, one of the world largest importers of wheat. - Soybeans were amongst the best performing commodities futures as CBOT May contracts were up 4.35% for the week due to strong US weekly export sales figures and optimistic future export sales expectations amidst soybean farmer protests in Argentina.
**Cocoa and Sugar May Contracts were also amongst the biggest gainers for the week with a weekly gain of 12.23% and 6.66% respectively. - Copper May contracts tested the $4 a pound level this week, coming cents away from copper’s record intraday high of $4.04 set on May 11, 2006. On the COMEX, copper is up 29.71% year-to-date.
- Corn May contracts hit a new record intraday high of $6.16 a bushel on 4/09 due to supply concerns. Corn at the CBOT is up 28.27% year-to-date.
Currencies:
- The dollar Index (.DXY), which tracks the dollar standing against six foreign currencies, is down 6.38% year-to-date.
- Thursday, the euro hit a new record-high of $1.5911 against the U.S. dollar, but pulled back to $1.5735 on news that the European Central Bank would keep its benchmark rate unchanged at 4.0%. The euro appreciated about .5% for the week to $1.5821 on Friday morning.
**Inflation in the euro zone hit a record 3.5% in March. - The pound sterling depreciated about 1% for the week against the greenback to $1.9714 on Friday. The Bank of England reduced its key interest rate by .25 points to 5%, or its lowest level since November 2006.
- For the week, the U.S. dollar hit an intraday low of 100.02 Japanese yen on Thursday. The greenback lost ground against the Japanese currency purchasing 101.15 yen on Friday.
- Highlights: China, Sweden, and Chile
- The greenback fell below the 7-yuan mark for the first time in over a decade, with one dollar purchasing 6.9721 yuan late on Thursday. The Chinese yuan has appreciated over 4% year-to-date.
- The U.S. dollar hit an all-time low of 5.9051 versus the Swedish krona on Thursday. The Swedish krona has appreciated about 8% year-to-date.
- Friday, the Chilean peso depreciated nearly 4% against the U.S. dollar, after Chile’s central bank announced that it would purchase approximately $8 billion throughout 2008, in an effort to prevent the peso from further strengthening against the greenback. On Friday afternoon, one dollar purchased 446.3 Chilean pesos.
Market Stats:
- Dow:
- The Dow ended down -284.00 or -2.25% for the week
- Friday, the Dow closed at 12,325.42 down -256.56 or -2.04%
- The Dow is Negative YTD down -7.08%
- The Dow is off by -1,839.11 or -12.98% from the market peak on October 9th of 14,164.53 - NASDAQ:
- The NASDAQ ended down -80.74 or -3.41% for the week
- Friday, the NASDAQ Composite closed at 2,290.24 down -61.46 or -2.61%
- The NASDAQ is Negative YTD down -13.65%
- The NASDAQ is off by -568.88 or -19.90% from the market peak on October 31 of 2,859.12 - S&P 500:
- The S&P 500 ended down -37.57 or -2.74% for the week
- Friday the S&P 500 closed at 1,332.83 down -27.72 or -2.04%
- The S&P is Negative YTD down -9.23%
- The S&P is off by -232.32 or -14.84% from the market peak on October 9th of 1,565.15
S&P Sector Performance for the week ending Friday, April 11, 2008:
S&P 500 Energy Sector (.GSPE) Up 0.44 or 0.08%
S&P 500 Utilities Sector (.GSPU) Down -0.08 or -0.04%
S&P 500 Health Care Sector (.GSPHC) Down -3.77 or -1.02%
S&P 500 Consumer Staples Sector (.GSPS) Down -4.45 or -1.51%
S&P 500 Materials Sector (.GSPM) Down -5.60 or -2.10%
S&P 500 Information Technology Sector (.GSPT) Down -10.56 or -2.93%
S&P 500 Telecomm Services Sector (.GSPTS) Down -4.95 or -3.40%
S&P 500 Consumer Discretionary Sector (.GSPD) Down -9.19 or -3.64%
S&P 500 Financials Sector (.GSPF) Down -16.33 or -4.62%
S&P 500 Industrials Sector (.GSPI) Down -20.47 or -5.86%
S&P Top 10 Performers for the week ending Friday, April 11, 2008:
WYETH (WYE) Up 3.46 or 8.33%
Washington Mutual Inc (WM) Up 0.78 or 7.67%
Peabody Energy Corp (BTU) Up 4.00 or 7.01%
Schering Plough Corp (SGP) Up 1.09 or 6.76%
Halliburton Co (HAL) Up 2.45 or 5.97%
The Bank of New York Mellon Corp (BK) Up 1.99 or 4.89%
Apache Corp (APA) Up 5.52 or 4.37%
The Progressive Corp (PGR) Up 0.68 or 4.16%
Noble Energy Inc (NBL) Up 3.20 or 4.02%
Medco Health Solutions Inc (MHS) Up 1.68 or 3.91%
S&P 10 Worst Performers for the week ending Friday, April 11, 2008:
CIT Group Inc (CIT) Down -3.01 or -20.34%
Circuit City Stores Inc (CC) Down -0.88 or -18.41%
Lennar Corp (LEN) Down -3.48 or -16.10%
Monster Worldwide Inc ( MNST) Down -3.91 or -14.96%
Freddie Mac (FRE) Down -4.11 or -14.89%
General Electric Co (GE ) Down -5.51 or -14.67%
Fannie Mae (FNM) Down -4.30 or -14.17%
Tesoro Corp (TSO) Down -4.36 or -13.95%
MBIA Inc (MBI) Down -1.81 or -13.30%
Federated Investors Inc (FII) Down -4.79 or -12.29%
Dow Top Performers for the week ending Friday, April 11, 2008:
Merck & Co Inc (MRK) Up 1.14 or 2.85%
The Boeing Co (BA) Up 1.21 or 1.60%
Chevron Corp (CVX) Up 0.75 or 0.85%
Wal-Mart Stores Inc (WMT) Up 0.40 or 0.74%
Johnson and Johnson (JNJ) Up 0.27 or 0.41%
International Business Machines Corp (IBM) Up 0.24 or 0.21%
The Coca Cola Co (KO) Up 0.04 or 0.07%
Exxon Mobil Corp (XOM) Down -0.12 or -0.14%
E I du Pont de Nemours and Co (DD) Down -0.17 or -0.34%
McDonald's Corporation (MCD) Down -0.32 or -0.57%
Dow Worst Performers for the week ending Friday, April 11, 2008:
General Electric Co (GE) Down -5.51 or -14.67%
ALCOA Inc (AA) Down -3.85 or -9.87%
American International Group Inc (AIG) Down -3.25 or -6.87%
JPMorgan Chase and Co (JPM) Down -3.04 or -6.67%
Bank Of America Corp (BAC) Down -2.47 or -6.27%
American Express Co (AXP) Down -2.72 or -5.90%
Verizon Communications (VZ) Down -1.75 or -4.69%
General Motors Corp (GM) Down -0.96 or -4.66%
Pfizer Inc (PFE) Down -0.90 or -4.22%
Caterpillar Inc (CAT) Down -3.03 or -3.89%
Key Earnings next week:
Monday: Eaton (ETN), WW Grainger (GWW)
Tuesday: Johnson & Johnson (JNJ), Intel (INTC), StateStreet (STT)
Wednesday: Coca Cola (KO), JP Morgan (JPM), eBay (EBAY), Intl. Business Machines (IBM)
Thursday: Merrill Lynch (MER), Google (GOOG), Pfizer (PFE), United Tech. (UTX), Nokia (NOK)
Friday: Caterpillar (CAT), Citigroup (C), Honeywell (HON), Wachovia (WB), Schlumberger (SLB)
Economic Data next week:
Monday: Retail Sales, Business Inventories
Tuesday: PPI, Core PPI, Net Foreign Purchases
Wednesday: CPI, Core CPI, Housing Starts, Building Permits, Capacity Utilization
Thursday: Leading Indicators, Jobless Claims (Initial), Philadelphia Fed
