Market 360: A weekly wrap of US equity markets, commodities, currencies, and more

For the week ending Friday, April 18, 2008 the US Markets ended the week rallying on earnings news. The Dow had its best week since Feb 1 and rallied 256.8 points on Wednesday and another 228.87 points on Friday, its biggest point gains since April 1st. The Dow and S&P 500 are close to being 10% above their closing lows of 11740.15 and 1273.37 set in March 10.

The PPI and CPI continued to show signs of inflation, but the core numbers, ex-food and energy, came in as expected. Commodities continued to surge with both oil and grains hitting multiple record highs, stemming food riots globally. The markets were cheered by better than expected quarterly results from JP Morgan and tech giants Google and IBM, which alleviated some worries associated with the credit crisis and slowdown of the U.S. economy.

Next Week: Look for earnings to dominate the markets once again with reports from Bank of America, Merck, Eli Lilly, Novartis, Microsoft, Yahoo and AT&T and more. Existing home sales Wednesday and new home sales Thursday will provide another check on the status of the housing market and volatile durable goods will also be reported on Thursday.

Highlights:
Earnings:
-Citigroup posted a first quarter loss of $5.1B well below analysts’ expectations. Despite negative quarterly results, shares were up 7.49% for the week due to an announced expense reduction plan of up to 20% and another 9,000 job cuts.

-JPMorgan reported stronger than expected first quarter earnings of 68 cents / share, beating analysts’ estimates by 4 cents / share. Positive results were due to sufficient capital and a $1.5 billion in pre-tax sales proceeds from Visa’s IPO. Shares of JPM climbed by 7.59% for the week.
*JPMorgan bought about 3.3M shares of Bear Stearns at $10.05 per share last Friday, upping its stake to 49.78%.

-Merrill Lynch reported a worse than expected first quarter net loss of $2.19 / share driven by write-downs in mortgage-related securities; it also plans to cut a total of 4,000 jobs. Nonetheless, CEO John Thain sees brighter business conditions in April, and shares rallied 8.40% for the week.

-Wells Fargo was one of the few banks to beat expectations and shares were up 8.69% for the week.

-Wachovia slashed its quarterly dividend by 41% after the company reported a net loss of 20 cents / share for the first quarter. WB shares declined 2.05% for the week.

-Washington Mutual reported a loss of $1.14B, missing expectations and sending shares lower on Monday. WaMu managed to pull in a 8.58% gain for the week buoyed by positive news from the other banks.

-Google surprised the markets with a first quarter profit increase of 31% and widely beat analysts’ estimates by 32 cents / share, helped by an increase of 20% in paid clicks and refuting the ComScore (SCOR) data that reported an estimate of 1.8% growth in U.S only ad clicks for Google. Shares of Google soared 20% on Friday on the news. Its gain of 90 points was the third biggest one-day point gain for an S&P member ever.

-International Business Machines beat first quarter estimates by 20 cents / share, and had a quarterly net profit increase of 26% from the same period a year ago based on strong corporate sales overseas. Shares of IBM were up 7.24% for the week.

-Intel shares rose 6.17% for the week after the company reported 1Q earnings on Tuesday that were in-line with analysts’ expectations and the company indicated that there is still strong demand for its microprocessors as opposed to its less favorable memory chips.

-eBay reported better than expected 1Q results with a profit gain of 22% generated mainly by its PayPal Electronic payment unit. However, the markets were disappointed in eBay's guidance. eBay shares are up 2.72% for the week.

* Nokia was another tech company that lowered guidance. Nokia fell 10.6% for the week.

-Pfizer approaches its 52-week low after the company's first quarter net income fell 18% from the same period a year ago, led by sharp sales declines of its biggest drug Lipitor. Shares of PFE almost finished flat at a 0.10% gain for the week.

-Crocs declined 43% on Tuesday after the company cut 1Q guidance due to slow sales; they also announced they would close their Quebec factory and move production to Mexico.

Mergers & Acquisitions:

-Delta and Northwest agreed to a merger deal valued at $17.7 billion that may be completed by the end of 2008. The merger would create the largest US airline, surpassing American. Shares of both NWA and DAL closed down 11.59% and 12.59%, respectively for the week on the deal announcement.
-Continental and United are also reported to be in merger talks.

-Circuit City received an unsolicited buyout offer from Blockbuster for $1.35 billion. Shares of Circuit City soared 27.4% on Monday after the merger news.

Sectors:

Pharmaceuticals:

- Shares of Pozen (POZN) rallied about 26% on Wednesday after the FDA approved its migraine pill Treximent, which is developed jointly with GlaxoSmithKline (GSK). Treximent is said to harvest more than $1 billion in yearly sales.

Economic Data:

-Retail Sales, which includes durable and non-durable goods, surprised with an increase of 0.2% in March, helped by higher gasoline prices. Excluding motor vehicles, the number was up 0.1%. The S&P Retail Index is up 4.88% for the week.

-Signs of inflation persist. The Producer Price Index (PPI) spiked 1.1% in March compared to a 0.3% increase the previous month. The Core PPI, which excludes food and energy, had a mild jump of 0.2% for March, just as economists had expected. The Consumer Price Index (CPI) came in at 0.3% for March. Core CPI, which excludes food and energy, was 0.2%, meeting economists' expectations.

-Housing Starts dropped 11.9% in March, to its lowest level in 17 years, signaling a continued slump in housing.

-The Philadelphia Fed Survey showed continued weakness in the region’s manufacturing sector that resulted in a negative reading of 24.9 for April. Negative readings indicate a contraction in activity, while positive readings denote expansion.

Commodities:

-Crude Oil for May delivery attained 4 new closing records and reached an intraday record peak of $116.82/barrel on 4/18 amidst lower inventories and a weak dollar. Oil has been soaring for the year, currently up 21.58% year to date.

**According to the EIA (Energy Information Administration) petroleum inventories fell 2.4 million barrels for the week of 4/11 due to refineries cutting back production, currently operating at only 81.4% of capacity.

**EIA also reported new highs in the national average gasoline price of $3.389/gal as of 4/14.

**AAA reported a new record national average price for unleaded gas at $3.445/gal as of 4/18, up 2.7 cents overnight.

**Diesel also set new high price levels at $4.168/gal on 4/18 according to AAA, up 2.2 cents overnight.

-RBOB Gas futures for May delivery are up for the eighth consecutive day as it reached a new record intraday high of $2.9765 per gallon on Friday 4/18 and it is currently up 6.48% for the week.

-Heating Oil for May delivery hit three new record settlements on 4/15, 4/16, and 4/18 at $3.2739, $3.283, and $3.2923 per gallon respectively and finished up 2.96% for the week.

-Natural gas futures for May delivery were up for the fourth day reaching an intraday high of $10.625 per million BTU’s on 4/18. However the all-time record settlement for natural gas set on 12/13/05 at $15.378 per million BTUs still holds.

-Rough Rice for May delivery continued to surge to new record highs reaching a peak of $24.05 per hundredweight on 4/18 on shortage fears from countries like Indonesia, India, Egypt, and Vietnam, which have imposed controls on rice exports. Rough rice has more than doubled by 71.01% year to date.
**The US is the only country that continues to export rice while other countries are stockpiling their supplies causing riots in Haiti, Philippines, Bangladesh, and Egypt.

Currencies:

-The Dollar Index strengthened and was positive for the week, as a rally in the U.S. markets helped the greenback gain some momentum against most major currencies.

-On Friday, the dollar finally strengthened against the euro with the euro losing almost 1% against the dollar on strong corporate earnings news in the United States. Better than expected earnings by major technology companies and a not so grim report by Citigroup, supported the greenback to recover some of its losses against the euro.
*The euro reached a historic high against the U.S. dollar to $1.5981 on Thursday, surpassing its all-time high of $1.5975 set the prior day.

-The U.S. dollar strengthened against the Japanese yen to 104.28 yen on Friday, appreciating about 3.24% for the week on strong U.S. earnings.

-The pound sterling modestly rose against the U.S. dollar by 1.24% for the week, hitting an intraday high of $1.9997 on Friday, but pulled back to $1.9932 as the dollar appreciated against other currencies.

Highlights: Colombia and Mexico
-Colombian peso traded at 1783.10 pesos/dollar on Friday, or its highest level since 1999, as companies demand the currency to pay taxes. The Colombian peso has appreciated over 11% year-to-date versus the U.S. dollar.

-Mexican peso, which is trading at a two-year high versus the U.S. dollar, strengthened on Friday to 10.4645 pesos/dollar. The Mexican Central Bank decided to hold steady its overnight rate at 7.5%. Mexico's high yields have attracted investors pushing the peso up nearly 4% this year.

Market Stats:

The Dow ended up 523.94 or 4.25% for the week
-Friday, the Dow closed at 12,849.36 up 228.87 or 1.81%
-The Dow is Negative YTD down -3.13%
-The Dow is off by -1,315.17 or -9.28% from the market peak on October 9th of 14,164.53

The NASDAQ ended up 112.73 or 4.92% for the week
-Friday, the NASDAQ Composite closed at 2,402.97 up 61.14 or 2.61%
-The NASDAQ is Negative YTD down -9.40%
-The NASDAQ is off by -456.15 or -15.95% from the market peak on October 31 of 2,859.12

The S&P 500 ended up 57.50 or 4.31% for the week
-Friday the S&P 500 closed at 1,390.33 up 24.77 or 1.81%
-The S&P is Negative YTD down -5.31%
-The S&P is off by -174.82 or -11.17% from the market peak on October 9th of 1,565.15

S&P Sector Performance for the week ending Friday, April 18, 2008:
S&P 500 Energy Sector (.GSPE) Up 44.83 or 7.68%
S&P 500 Information Technology Sector (.GSPT) Up 22.11 or 6.32%
S&P 500 Materials Sector (.GSPM) Up 14.53 or 5.55%
S&P 500 Financials Sector (.GSPF) Up 17.53 or 5.20%
S&P 500 Industrials Sector (.GSPI) Up 15.53 or 4.73%
S&P 500 Consumer Discretionary Sector (.GSPD) Up 9.52 or 3.91%
S&P 500 Utilities Sector (.GSPU) Up 6.74 or 3.38%
S&P 500 Telecomm Services Sector (.GSPTS) Up 1.57 or 1.12%
S&P 500 Consumer Staples Sector (.GSPS) Up 1.81 or 0.63%
S&P 500 Health Care Sector (.GSPHC) Up 2.10 or 0.57%

S&P Top 10 Performers for the week ending Friday, April 18, 2008:
Circuit City Stores Inc (CC) Up 0.83 or 21.28%
MGIC Investment Corp (MTG) Up 2.21 or 20.48%
Charles Schwab Corp (SCHW) Up 3.37 or 18.39%
Google Inc (GOOG) Up 81.96 or 17.92%
Cognizant Technology Solutions Corp (CTSH) Up 4.43 or 16.70%
BJ Services Co (BJS) Up 4.65 or 16.28%
Freddie Mac (FRE) Up 3.57 or 15.20%
Altera Corp (ALTR) Up 2.83 or 15.19%
Eaton Corp (ETN) Up 11.69 or 14.81%
Cummins Inc (CMI) Up 7.03 or 14.59%

S&P 10 Worst Performers for the week ending Friday, April 18, 2008:
State Street Corp (STT) Down -10.79 or -13.60%
Forest Laboratories Inc (FRX) Down -3.87 or -9.75%
LSI Corp (LSI) Down -0.44 or -8.06%
International Game Technology (IGT) Down -2.70 or -7.07%
Northrop Grumman Corp (NOC) Down -5.11 or -6.68%
Centex Corp (CTX) Down -1.33 or -5.69%
Allegheny Technologies Inc (ATI ) Down -4.10 or -5.23%
American Capital Strategies Ltd (ACAS) Down -1.39 or -4.12%
Procter & Gamble Co (PG) Down -2.83 or -4.04%
Abbott Laboratories (ABT) Down -2.08 or -3.94%

Dow Top Performers for the week ending Friday, April 18, 2008:
Caterpillar Inc (CAT) Up 10.48 or 14.01%
American International Group Inc (AIG) Up 4.18 or 9.49%
JPMorgan Chase and Co (JPM) Up 3.23 or 7.59%
Citigroup Inc (C) Up 1.75 or 7.49%
International Business Machines Corp (IBM) Up 8.40 or 7.24%
Intel Corp (INTC) Up 1.31 or 6.17%
Microsoft Corp (MSFT) Up1.72 or 6.08%
Exxon Mobil Corp (XOM ) Up 5.38 or 6.07%
Hewlett-Packard Co (HPQ) Up 2.71 or 5.96%
3M Company (MMM) Up 4.43 or 5.65%

Dow Worst Performers for the week ending Friday, April 18, 2008:
Procter & Gamble Co (PG) Down -2.83 or -4.04%
Merck & Co Inc (MRK) Down -1.38 or -3.35%
The Coca Cola Co (KO) Down -0.18 or -0.30%
Pfizer Inc (PFE) Up 0.02 or 0.10%
AT&T Inc (T) Up 0.21 or 0.56%
Johnson and Johnson (JNJ) Up 0.51 or 0.77%
Verizon Communications (VZ) Up 0.44 or 1.24%
Home Depot Inc (HD) Up 0.51 or 1.81%
General Electric Co (GE) Up 0.64 or 2.00%
The Boeing Co (BA) Up 1.80 or 2.34%

Key Earnings next week:
Monday: Bank of America (BAC), Merck (MRK), Novartis (NVS), Elli Lilli (LLY)
Tuesday: AT&T (T), DuPont (DD), McDonald’s (MCD), Yahoo! (YHOO)
Wednesday: Boeing (BA), United Parcel (UPS), Amazon.com (AMZN), Apple (AAPL)
Thursday: ConocoPhillips (COP), 3M Company (MMM), PepsiCo (PEP), Microsoft (MSFT)
Friday: Ericsson (ERIC)

Economic Data next week:
Wednesday: Existing Home Sales
Thursday: Durable Goods, Jobless Claims, New Home Sales
Friday: Consumer Sentiment