Market 360: The Best and Worst of the Week for US Equities, Commodities, Currencies, and More

For the week ending Friday, August 8, 2008, the U.S. markets ended the week on a positive note, cheered by a retreat in commodity prices, a Fed’s decision to keep rates steady at 2%, better-than-expected results in pending home sales, and a stronger dollar. The ECB also kept its key rate unchanged at 4.25%, as concerns over the health of the euro zone economy increase. The NASDAQ led the major indices, up 4.46% for the week, its best week since 4/18. In addition to today's 300 point gain, the Dow managed a 331 point run on Tuesday, marking its biggest point gain since April 1. Offsetting the rally, disappointing retailer sales and new capitalization uncertainties from Fannie Mae (FNM) & Freddie Mac (FRE) weighed on U.S. stocks in the middle of the week.

Next Week's Highlights: The markets will closely follow economic news on International Trade, the Consumer Price Index (CPI), and Industrial Production. The next batch of earnings will come mostly from retailers Wal-Mart, Macy's, JC Penney, and Home Depot. Hewlett-Packard will also report.

M&A, Deals, Corp Actions:

  • Privately held insurer Nationwide Mutual reached a $2.4 billion acquisition agreement with Nationwide Financial Services for a total ownership of the firm. The merger will allow both companies to extend their product offerings and financial portfolios to new and existing customers. Shares of NFS rose 9.3% for the week on deal news.

  • Delta and Northwest received merger clearance on Wednesday from the European Commission, but the airlines need to seek further consent from the U.S Department of Justice. The deal will create the nation’s largest passenger airline carrier with more than $1 billion in annual revenue. Shares of Delta and Northwest rallied 18.4% and 20.3%, respectively for the week, on lower oil prices and as both companies move one step closer to merger completion.

  • TowerGroup announced that it will acquire insurance rival CastlePointHoldings for $490 million, in a deal that will offer both companies enhanced financial opportunities, and lower expenses. The combined synergies will create a combined gross premium of approximately $1.2 billion. Merger news had a positive impact on CHPL’s shares, as they finished up 21.96% for the week.

  • U.S Peoplesupport Inc. agreed to a buy-out offer from Indian privately-held firm Aegis BPO, for $250 million in a move that would allow the foreign company to expand its business operations into new business segments and territories. Shares of PSPT jumped ~25% on Monday on deal news.

  • China Mass Media International a television advertisement company in China debuted on the NYSE at an initial public offering of $6.80/share, but declined 14.71% thereafter from its opening price. China Mass Media which is based in Beijing will be assisting China Central Television in the sales and marketing of ad slots during the 2008 Summer Olympics, which began today on Friday-8/08/08 (be sure to watch all the action on our parent NBC).
    *China Mass Media is the third Chinese stock this year to make an entrance in the U.S. stock market, followed by China Distance Education , and ATA Inc , with DL trading 8.7% below its $7 IPO price, and ATAI successfully up 47% from its $9.5 initial price.

Other Market Moving News:

  • A mixed week for financial stocks, as bond insurer Ambac Financial surprisingly reported strong 2Q results on gains from fixed-income securities, leading to a 101.4% increase in its stock for the week.
    *Mortgage-giant Freddie Mac swung to wider-than-expected 2Q losses, while the company also expects to cut its 3Q dividend by 80%. Freddie also stated that it may fail to meet the 20% mandatory capital requirements imposed by OFHEO’s (Office of Federal Housing Enterprise Oversight). Shares of Freddie fell 17% for the week.
    **Furthermore, Fannie Mae shares tumbled 23.43% for the week after the company also reported a 2Q net loss due to defaulting mortgages and continued housing market deterioration. The firm also slashed its dividends by 86% as a measurement to conserve capital.
    ***A reduction of investors’ confidence for these two Government-Sponsored Enterprises (GSE) pressed Congress to pass a $300 billion rescue program to aid troubled homeowners last month.

  • Retailers reported disappointing July sales, with 61% of the 39 companies reporting posted results below expectations. Discounters such as BJ’s Wholesale and Costco were amongst the biggest winners, topping July sales estimates, as each reported a growth of 16.7% & 10% respectively, compared with forecasts of 12.9% for BJ’s & 7.8% for Costco. Wal-mart reported a 3% growth, falling short of its expected 3.4% growth.
    *Teenage apparel Buckle saw the biggest growth of 20.9%, but slightly missed estimates as its shares shed 4.46% for the week.


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  • Crude Oil for September delivery fell for four of five days this week, after crude reached a three month low, reaching an intraday low of $114.9/barrel on Friday. U.S. crude inventories expansion of 1.7M barrels showed demand continues to erode. Combined with a stronger dollar, oil dropped 7.91% for the week, and is off -21.8% from its all time high of $147.27/barrel hit on 7/11.

  • Frozen Pork Bellies for February 09 delivery rose to a six-month high, as futures traded at an intraday high of 93.275 cents/lb on 8/8, levels not seen since late February. On Tuesday, the Chicago Mercantile Exchange announced a drop on the 3 cents/lb daily limit causing larger delivery supplies, and a 42.4% increase in pork bellies for the week.
    **The nation’s largest hog and pork producer Smithfield Foods (SFD) also finished up 19.4% for the week.

  • Grains faced a heavy-sell off with Soybean Meal for December delivery being the worst performer for the week, down 14.4%. Corn for December delivery slumped 11.41% ,as it settled at $5.183/bushel on Friday, the lowest close since March 20th.
    **Grains futures fell due to an expected rise in crop production and supply estimates. The crop report will be revealed on 8/12 by the U.S. Department of Agriculture, as excellent crop weather lingers in the U.S. Midwest.

Currencies: The US dollar rallied against the euro, as investors worried about the health of European economies. A 4.2% drop in crude oil prices on Friday, to ~$115 per barrel, helped to further lift the greenback.

  • The dollar index hit an intraday high of 75.90 on Friday, its highest level since February 21, 2008. The dollar index was last at 75.69, up 1.53%. The dollar index has broken out of its 200-day moving average, which could be bearish for commodities. In contrast, it could raise investors' interest in US assets.

  • The euro hit an intraday low of $1.5008 per euro, dropping to its lowest level since February 27, 2008. On Thursday, the European Central Bank announced that it would hold interest rates steady at 4.25%, as the ECB struggles to balance high inflation and sluggish growth. The euro fell as much as 2.07% from its intraday high during Friday's trading session, marking its biggest intraday-move since May 7, 2004. The euro was last at $1.5035, from $1.5321 late Thursday.

  • The pound sterling dropped to its lowest level since November 24, 2006, and was poised for its biggest weekly-percentage-decline since July 2005. The pound sterling hit an intraday low of $1.9213 per pound on growing concerns over England's economic outlook. Friday afternoon, the pound was at $1.9209, from $1.9435 late Thursday.

  • The greenback crossed the 110-Japanese yen mark on Friday, rising to it highest level since January 2, 2008. The dollar traded at 110.25 yen on Friday, from 109.43 yen late Thursday, while the dollar raised to 1.0813 Swiss francs per dollar, from 1.0623 francs late Thursday.

  • Highlights: China
    As the Olympic games kick off, the Chinese yuan has appreciated 6.10% year-to-date, with one dollar purchasing 6.8588 yuan. For a briefing on China's economy and more, click here.

Market Stats:

  • DOW
    • The Dow ended up 408.00 or 3.60% for the week
    • Friday, the Dow closed at 11,734.32, up 302.89 or 2.65%
    • The Dow is Negative YTD down -11.54%
    • The Dow is off by -2,430.21 or -17.16% from the market peak on October 9th of 14,164.53
    • The NASDAQ ended up 103.14 or 4.46% for the week
    • Friday, the NASDAQ Composite closed at 2,414.10, up 58.37 or 2.48%
    • The NASDAQ is Negative YTD down -8.98%
    • The NASDAQ is off by -445.02 or -15.56% from the market peak on October 31 of 2,859.12
  • S&P 500
    • The S&P 500 ended up 36.01 or 2.86% for the week
    • Friday the S&P 500 closed at 1,296.32, up 30.25 or 2.39%
    • The S&P is Negative YTD down -11.72%
    • The S&P is off by -268.83 or -17.18% from the market peak on October 9th of 1,565.15

S&P Sector Performance for the week ending Friday, August 8, 2008:
S&P 500 Consumer Discretionary Sector (.GSPD) Up 17.25 or 7.72%
S&P 500 Information Technology Sector (.GSPT) Up 20.87 or 5.97%
S&P 500 Health Care Sector (.GSPHC) Up 18.90 or 5.13%
S&P 500 Industrials Sector (.GSPI) Up 13.37 or 4.37%
S&P 500 Consumer Staples Sector (.GSPS) Up 11.87 or 4.20%
S&P 500 Telecomm Services Sector (.GSPTS) Up 2.96 or 2.35%
S&P 500 Utilities Sector (.GSPU) Up 1.98 or 1.06%
S&P 500 Financials Sector (.GSPF) Up 2.90 or 1.00%
S&P 500 Materials Sector (.GSPM) Down -4.88 or -2.01%
S&P 500 Energy Sector (.GSPE) Down -22.30 or -3.99%

S&P Top 10 Performers for the week ending Friday, August 8, 2008:
Fidelity National Information Srvcs Inc (FIS) Up 4.08 or 21.33%
Polo Ralph Lauren Corp (RL) Up 12.22 or 20.71%
Coach Inc (COH) Up 5.04 or 20.28%
Advanced Micro Devices Inc (AMD) Up 0.85 or 19.86%
CB Richard Ellis Group Inc (CBG) Up 2.55 or 18.96%
CIGNA Corp (CI) Up 6.57 or 18.45%
JC Penney Company Inc (JCP) Up 5.55 or 18.38%
Tesoro Corp (TSO) Up 2.59 or 16.89%
SanDisk Corp (SNDK) Up 2.31 or 16.09%
Eastman Kodak Co (EK) Up 2.32 or 15.93%

S&P 10 Worst Performers for the week ending Friday, August 8, 2008:
Freddie Mac (FRE) Down -2.08 or -26.07%
Fannie Mae (FNM) Down -2.77 or -23.43%
Massey Energy Co (MEE) Down -16.34 or -21.68%
AK Steel Holding Corp (AKS) Down -9.14 or -15.22%
Range Resources Corp (RRC) Down -7.21 or -14.71%
Ciena Corp (CIEN) Down -2.88 or -14.48%
Washington Mutual Inc (WM) Down -0.74 or -13.91%
Whole Foods Market Inc (WFMI) Down -2.77 or -12.93%
Chesapeake Energy Corp (CHK) Down -5.93 or -12.05%
National Oilwell Varco Inc (NOV) Down -8.95 or -11.26%

Dow Top Performers for the week ending Friday, August 8, 2008:
Microsoft Corp (MSFT) Up 2.69 or 10.57%
Home Depot Inc (HD) Up 2.47 or 10.33%
McDonald's Corporation (MCD) Up 5.90 or 9.87%
The Boeing Co (BA) Up 5.85 or 9.43%
Intel Corp (INTC) Up 1.88 or 8.41%
Merck & Co Inc (MRK) Up 2.69 or 8.09%
Procter & Gamble Co (PG) Up 4.68 or 7.21%
Pfizer Inc (PFE) Up 1.24 or 6.67%
The Walt Disney Co (DIS) Up 1.95 or 6.48%
United Technologies Corp (UTX) Up 3.30 or 5.19%

Dow Worst Performers for the week ending Friday, August 8, 2008:
American International Group Inc (AIG) Down -1.92 or -7.17%
Bank Of America Corp (BAC) Down -1.08 or -3.24%
General Motors Corp (GM) Down -0.20 or -1.96%
Exxon Mobil Corp (XOM) Down -1.00 or -1.25%
ALCOA Inc (AA) Down -0.38 or -1.18%
Chevron Corp (CVX) Up 0.09 or 0.11%
Wal-Mart Stores Inc (WMT) Up 0.11 or 0.19%
JPMorgan Chase and Co (JPM) Up 0.31 or 0.76%
American Express Co (AXP) Up 0.62 or 1.67%
International Business Machines Corp (IBM) Up 2.17 or 1.71%

Key Earnings next week:
Monday: Calpine Corp (CPN), Sysco (SYY), Fluor (FLR)
Tuesday: UBS AG (UBS), VeraSun Energy (VSE), Applied Materials (AMAT)
Wednesday: Deere (DE), Macy’s (M)
Thursday: Wal-Mart (WMT), JC Penney (JCP), Agilent (A), Nordstrom (JWN)
Friday: Abercrombie & Fitch (ANF)

Economic Data next week:
Tuesday: Trade Balance, Treasury Budget
Wednesday: Export & Import Prices, Retail Sales, Business Inventories
Thursday: Consumer Price Index, Jobless Claims (weekly)
Friday: Industrial Production, Capacity Utilization