US Market ended the week on Friday, 13 June on a mixed note. The Dow
Jones industrial Average and the S&P 500 managed to eke out gains
for the week. Nasdaq was the only major index to register loss. It was
another volatile week of trading. But financial sector remained
burdened with concerns about Lehman Brothers' financial position. On
the other hand, Fed's inflation-fighting comments made market more
nervous during the middle of the week. The only positives were the
pleasing economic data and a welcome pickup in M&A news.
The Dow Jones Industrial Average gained 97.5 points for the week to end
at 12,307.6. Tech - heavy Nasdaq lost 20 points at 2,454.5. S&P 500
ended practically unchanged at 1,360.03. In percentage terms, Dow and
Nasdaq gained and lost 0.8% respectively.
Although the week
began on an inauspicious note, it certainly ended on an auspicious one
as the indices rallied into the close Friday, finishing at or near the
session's highs.
On Friday, 13 June, crude prices closed down
$1.90 on the New York Mercantile Exchange, settling at $134.84 per
barrel and finishing the week roughly 2.7% lower. The sustained drop in
oil prices helped provide airline and transportation stocks a healthy
lift. Indices rallied and Dow ended higher by almost 165 points.
Also, on the economic front, consumer prices increased 0.6%
month-over-month and 4.2% year-over-year, according to the May Consumer
Price Index (CPI) data. Market was forecasting a monthly increase of
0.5% and an annualized increase of 3.9%. Core CPI data, which excludes
food and energy, indicated prices increased 0.2% month-over-month and
2.3% year-over-year, which was in-line with the consensus. Nasdaq too
ended higher by 50 points on that day.
Earlier during the
week, in a speech late Monday, 9 June, Bernanke emphasized the central
bank's determination to hold down inflation expectations. The Fed has
hinted that it is most likely done cutting rates, and its next move is
likely an increase in rates. Market viewed as a signal the Fed will
move to tighten monetary policy later this year.
In the
financial sector, Lehman Brothers weighed on the financial sector today
after a second quarter earnings preannouncement from the company topped
headlines. The struggling Wall Street firm reported that it expects a
massive $2.8 billion second quarter loss and plans to raise $6.0
billion in new capital in common and preferred stock offerings. The
stock slid by 20% during the week.
In economic news during the
week, the Commerce Department reported that U.S. trade deficit widened
to $60.9 billion in April on higher prices for crude oil and other
commodities. Imports rose 4.5% to $216.4 billion, while exports
increased 3.3% to $155.5 billion. Excluding the impact of inflation,
the trade deficit slipped by 0.1% to the lowest level in nearly five
years.
Also, retail sales increased May by 1.2%, excluding
autos. The results were way ahead of the 0.7% increase that market had
expected. April sales, less autos, were revised upward to an increase
of 1.0%. The best part of the report was that, paired with the May
same-store sales seen last week, the retail sales report for May, and
the upward revision to April, the same will bode well for upward
revisions to second quarter real GDP forecasts.
In other
economic news, initial jobless claims for the week ending 7 June
totaled 384,000, which is more than the 370,000 claims that were
expected.
Among interesting corporate news, Yahoo! announced
that it failed to reach an agreement with Microsoft but it has,
instead, decided to team up with Google to increase its competitiveness
in Internet search and display markets.
In the M&A arena,
Belgian brewer InBev made an unsolicited $46 billion offer for
Anheuser-Busch. The offer to BUD shareholders was 11% premium to last
closing price.
Executive Summary
For the week,
indices ended mixed. In percentage terms, Dow and Nasdaq gained and
lost 0.8% respectively. S&P 500 ended practically unchanged.
Although the week began on an inauspicious note, it certainly ended on
an auspicious one as the indices rallied into the close Friday,
finishing at or near the session's highs.
The week was mainly
dominated by the crude oil and economic reports. Financial sector
remained burdened due to news on the Lehman Brothers front. Crude
prices closed down $1.90 on the New York Mercantile Exchange, settling
at $134.84 per barrel and finishing the week roughly 2.7% lower. The
sustained drop in oil prices helped provide airline and transportation
stocks a healthy lift.
For the year, Dow, Nasdaq and S&P 500 are down by 7.2%, 7.5% and 7.4% respectively.
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