advertisement
Article Tools
| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
The stock market went basically nowhere on Friday as a dreadful report on new-home sales quickly wiped out an early rally.
And, with one day of trading left in 2007, investors will spend the weekend -- and probably beyond -- wondering if the market can reclaim some of the mojo that led to records in October.
At the close, the Dow Jones industrials were up 6 points to 13,366. The Nasdaq Composite Index was down 2 points to 2,674, and the Standard & Poor's 500 Index was up 2 points to 1,478.
Among widely followed stocks, Apple (AAPL, news, msgs) finished the day up 0.6% to $199.83. It was the third day in a row that the maker of the iPod and iPhone couldn't close at $200 or higher.
For the week, the Dow lost 0.7%. The S&P 500 dropped 0.4%, and the Nasdaq slipped 0.7%. For the year, the Dow is up 7.2%. The S&P 500 is up 4.2%, and the Nasdaq is up 10.7%.
The market opened with a roar after a drubbing Thursday that saw the Dow drop 192 points. But a 91-point gain in the first five minutes of trading quickly dissipated after the Commerce Department said new-home sales in November fell 9% from October and hit their lowest levels since April 1995.
The takeaway for investors was bleak: Don't expect much from housing for the foreseeable future. The market will get a second chance to test that judgment Monday when the National Association of Realtors issues a report on existing-home sales in November. The consensus estimate is for an annual sales rate of 4.97 million units, unchanged from October and down more than 20% from November 2006.
- Video: What's ahead next week
Thursday's sell-off was triggered by a weak report on durable-goods orders and the assassination of former Pakistani Prime Minister Benazir Bhutto.
Despite the uncertainty created by Bhutto's death, it's probably unfair to read too much into the market reaction. Trading is typically light between Christmas and New Year's, and any big upset can send the market higher or lower quite quickly.
- Video: Looking ahead to 2008
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 13,365.87 | 13,450.65 | -0.63% | 7.24% |
| S&P 500 | 1,478.49 | 1,484.46 | -0.40% | 4.24% |
| Nasdaq Composite | 2,674.46 | 2,691.99 | -0.65% | 10.73% |
| Russell 2000 | 771.76 | 785.60 | -1.76% | -2.02% |
| Crude oil per barrel | $96.00 | $93.31 | 2.88% | 57.25% |
| 10-yr. Treasury yield | 4.10% | 4.17% | -1.73% | -13.04% |
| Gold per troy ounce | $842.70 | $815.40 | 3.35% | 32.08% |
Starting to think about 2008
But there are already a few points to be made about next year.- Historically, January has been one of the strongest months of the year. If the market doesn't show gains, it could be a tough go. Plus, according to the Stock Trader's Almanac, the market has risen in January nine out of past 13 presidential election years since 1950.
- But the financial sector of the market faces continued turmoil because of the havoc created by the subprime-mortgage mess. This is important because financials represent nearly 20% of the market capital of the S&P 500. The financial sector of the S&P 500 is down 21% this year. There will be a near-constant debate in the early part of the year about whether the financials have bottomed. Most analysts see the bottom coming around mid-year.
- Oil prices will be a constant issue, making life miserable for consumers around the world. The effect of high fuel prices, combined with the stress of facing financial companies, will give the Federal Reserve all the excuse it needs to cut interest rates at the end of January and probably once more after that.
- Technology stocks had a monster year, especially big technology stocks like Apple, up 136% this year; Research in Motion (RIMM, news, msgs) up 175%; Amazon.com (AMZN, news, msgs), up 139%; and Google (GOOG, news, msgs), up 53%. The Nasdaq-100 Index is up nearly 20% on the year. There's lots of talk that this probably will continue. But remember that tech bubbles can be very nasty if you get out too late.
- Lastly, foreign countries with huge cash stock piles, known as sovereign wealth funds, have been investing directly in giant American financial institutions such as Citigroup (C, news, msgs), Morgan Stanley (MS, news, msgs) and Merrill Lynch (MER, news, msgs). These include Abu Dhabi, China and Singapore. This trend is likely to continue, in part because the dollar is so cheap. But if what happens if the stocks don't start turning around? Watch out.
How bad was the new-home sales report?
In a word: ugly.The Commerce Department reported that sales of new homes fell to an annual rate of 647,000 units, down 9% from October and 34% from a year ago. It was the lowest rate since April 1995. Economists had forecast a drop in November sales to an annual rate of 715,000.
Sales were weakest in the Midwest -- down more than 27% from October to November -- while sales in the West were up 4% to 157,000 homes. Worse, the Commerce Department revised its estimate for October sales down to 711,000 from an original estimate of 728,000.
The report showed that builders have a nine-month supply of homes for sale, and they're looking at getting less for their efforts.
The median price of a new home was $239,100, up slightly from October but down 9% from a peak of $262,600 in March. The reason for the uptick in October was the relative strength of sales in the West, which includes California, the nation's priciest state.
The report knocked home-building stocks lower, with the Philadelphia Housing Sector Index ($HGX.X) falling 0.6% to just under 143. The index is down 40% this year. Pulte Homes (PHM, news, msgs) was down 2.2% to $10.47. Lennar (LEN, news, msgs) was down 0.3% to $17.62.
A bit of relief after the Bhutto assassination
The Dow had lost 192 points on Thursday on weak economic news, higher oil prices and the fallout from the assassination of former Pakistan Prime Minister Benazir Bhutto. Japanese stocks were lower Friday, the last trading day of the year in Japan. The Nikkei 225 Index ($N225) was down 257 points to 15,308. The index finished down 11% for the year, its first down year since 2002.- Talk back: Will the market surge after Jan. 1?
While the overall market was lower, there was strength in materials and energy stocks. Gold moved 1.3% higher to $842.70 an ounce, a reaction to the Bhutto assassination and concern that Pakistan is likely to see more political turmoil. Gold is up 3.3% on the week and 32% on the year. The Amex Gold BUGS Index ($HUI.X) was up 2.6% to 414.
Crude oil closed at $96 a barrel, down 62 cents from Thursday. For the week, crude oil was up 2.9% and is up 57% on the year.
The Amex Oil Index ($XOI.X) was up 0.7% to 1,577. And the Philadelphia Oil Service Sector Index ($OSX.X) added 0.5% to 307. ExxonMobil (XOM, news, msgs) was up 1.4% to $95, the best performer among the 30 Dow stocks. ConocoPhillips (COP, news, msgs) rose 0.5% to $89.13.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $96.00 | $96.62 | -$0.62 | 8.22% | 57.25% |
| Heating oil (per gallon) | $2.6370 | $2.6803 | -$0.0433 | 4.25% | 65.03% |
| Natural gas (per million BTU) | $7.3860 | $7.2000 | $0.1860 | 1.15% | 17.26% |
| Unleaded gasoline (per gallon) | $2.4597 | $2.4962 | -$0.0365 | 8.88% | 53.53% |
Buffett goes into bond insurance
Insurer ING Group (ING, news, msgs) said Friday it will sell its reinsurance unit, NRG, to Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) for about $435.7 million.The acquisition could be part of a plan by Buffett to launch a new company to insure municipal bonds. The Wall Street Journal reported Buffett will launch a bond-insurance business, aiming to capitalize on instability in that sector.
Buffett's plans shook up shares of bond insurers MBIA (MBI, news, msgs) and Ambac Financial Group (ABK, news, msgs), which fell on the expected competition from the Oracle of Omaha. MBIA shares fell 14% to $19.12 Friday; Ambac fell nearly 14% to $25.12.
In recent weeks, bond insurers have come under fire as rating agencies have downgraded them, or warned of possible downgrades, because of their exposure to deteriorating credit markets.
Municipal issuers -- like hospitals, school districts and sewer systems -- often seek out bond insurance as a way to lower their cost of borrowing and make their issues more attractive to investors.
Big banks may sell units
Some of the biggest names in banking are considering selling off units to cope with current market turmoil, The Wall Street Journal said Friday.- Read more: Big banks vulnerable to takeover
Citigroup could either sell or close several units, offloading as much as $12 billion worth of what are considered noncritical assets, according to the Journal report.
HSBC (HBC, news, msgs) might exit all or parts of its $13 billion U.S. auto-finance business, the Journal reported. Merrill Lynch has already announced that it would sell most of its commercial-lending business to General Electric (GE, news, msgs) for $1.3 billion, The Journal noted.
"I think we are going to see a real wave of these (deals) coming through in the first half of next year," says Huw van Steenis, a banking analyst at Morgan Stanley in London, told The Journal.
Citigroup was down 1% to $29.29. Merrill Lynch was down 0.4% to $52.97, and JPMorgan Chase (JPM, news, msgs) was off 0.9% to $43.26.
Shoe stock rises after court ruling
Shares of Genesco (GCO, news, msgs) surged in pre-open trading Friday, a day after a judge ruled The Finish Line (FINL, news, msgs) cannot back out of its purchase of the footwear maker.- Talk back: Could you quit credit cards cold turkey?
Genesco shares jumped 16% to $38.50 Friday. After the buyout was announced, shares rose as high as $54.15. Finish Line shares fell 25% to $2.30.
Finish Line agreed to buy Genesco for $1.5 billion, or $54.50 per share, on June 18. But Genesco reported disappointing second-quarter results in August, and in September, Finish Line said Genesco was violating the buyout agreement by withholding financial information.
Genesco sued Finish Line that month, and on Thursday, a Nashville judge ruled in Genesco's favor, saying the company did not deceive Finish Line by withholding information about its financial condition.
Dividend payments jump 11.5% in 2007
Companies in the S&P 500 paid a record $27.73 a share in dividends in 2007, and Standard & Poor's expects that amount to rise 9.3% in 2008.S&P said the 11.5% increase in the average per-share dividend from 2006 to 2007 resulted in a total of $246.6 billion in dividend payments. Dividends in 2008 are expected to reach $30.30 a share.
"While we have concern over the deterioration within the financial sector, we believe that the vast majority of S&P 500 companies will continue their long history of dividend increases in 2008," said Howard Silverblatt, senior index analyst at S&P.
Taxes on most types of corporate dividends were cut to 15% in 2003 and are scheduled to stay at that tax rate through 2008. The move helped make dividend payments -- along with stock buybacks -- more attractive to companies as they began accumulating large cash piles amid a rebounding economy and earnings growth.
S&P data show that corporate buybacks have outpaced dividends in aggregate dollars and growth. "The growth in dividends appears to be negatively impacted by the large expenditures on buybacks in 2007," Silverblatt told The Journal. "However, we are encouraged that 11 companies in the S&P 500 chose to initiate a dividend payment in 2007, bringing the total to 389, a level not seen in seven years."
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 3.080% | 3.075% | 0.005 | 0.33% | -36.95% |
| 5-year Treasury note yield | 3.522% | 3.617% | -0.095 | 3.04% | -25.08% |
| 10-year Treasury note yield | 4.096% | 4.199% | -0.103 | 3.12% | -13.04% |
| 30-year Treasury bond yield | 4.514% | 4.614% | -0.100 | 2.52% | -6.31% |
| Currencies | |||||
| U.S. Dollar Index | 76.195 | 76.600 | -0.405 | 0.01% | -8.19% |
| British pound in U.S. dollars | $1.9972 | $1.9964 | 0.0008 | -2.92% | 1.92% |
| U.S. dollar in British pounds | £0.5007 | £0.5009 | -0.0002 | 3.00% | -1.88% |
| Euro in U.S. dollars | 1.4728 | 1.4613 | 0.0114 | 0.49% | 11.58% |
| U.S. dollar in euros | € 0.6790 | € 0.6843 | -0.0053 | -0.48% | -10.37% |
| U.S. dollar in yen | 112.30 | 113.81 | -1.51 | 1.21% | -5.65% |
| U.S. dollar in Canadian dollars | $0.981 | $0.981 | 0.000 | -1.82% | -15.79% |
| Canadian dollar in U.S. dollars | $1.019 | $1.020 | 0.000 | 1.79% | 18.80% |
| Commodities | |||||
| Gold | $842.70 | $831.80 | $10.90 | 6.79% | 32.08% |
| Copper | $3.0720 | $3.1320 | -$0.060 | -3.53% | 7.00% |
| Silver | $14.8950 | $14.8950 | $0.08 | 5.15% | 14.56% |
| Crude oil (NYMEX) (per barrel) | $96.00 | $96.62 | -$0.62 | 8.22% | 57.25% |
By Charley Blaine
Rate this Article
High