With Oracle fuelling Friday’s rally, indices close higher for the week
US Market posted decent gains for the week ended Friday, 12th October, 2007. But it was mainly Friday’s, 12 October’s, 2007 gains that helped the market close higher for the week. The most important event for the week was the release of the minutes of Federal Reserve’s 18 September meeting details on Tuesday, 9 October. Earnings season started with Alcoa declaring the first earnings report of the season.
Among major stories of the week, Google crossed the $600 mark for the first time and touched an closed at all time high of $ 637 on Friday. Boeing announced that it is delaying the delivery of its Dreamliner models and said that the delay might be beyond six months. Boeing shares did take a toll on the Dow Jones Industrial Average for a couple of days during the week.
Nevertheless, The Dow Jones Industrial Average gained 27.07 points for the week. Tech - heavy Nasdaq gained 25.37 points and S&P 500 gained 4.21 point.
The gain for the week mainly came due to Friday’s (12 October) gains. The indices rallied that day mainly based on the news that Oracle made a $6.7 billion all-cash offer to acquire BEA Systems. With this news, the tech sector resumed its leadership position and carried the broader market higher along with the materials and energy sectors. Dow, Nasdaq and S&P 500 gained 78, 34 and 8 points respectively.
The minutes of the 18 September meeting, where the Fed cut the interest rate from 6.25% to 5.75%, stated that in "their discussion of the economic situation and outlook, meeting participants focused on the potential for recent credit market developments to restrain aggregate demand in coming quarters." The minutes also added that “participants regarded the outlook for economic activity as characterized by particularly high uncertainty, with the risks skewed to the downside."
The middle of the week witnessed some sell-off. Dow plunged more than 100 points on Thursday, 11 October. The sell-off was reportedly prompted by some comments from the European Central Bank.
On the earnings side, Alcoa got third quarter reports off to a poor start, as profits were below expectations. General Electric reported in line with expectations. Costco and PepsiCo beat Wall Street forecasts. Wal-Mart and McDonald's provided upbeat outlooks.
Among other economic news hitting the market during the week, new claims for unemployment for the week ended 6 October dipped to 308,000 from 320,000 the prior week. Layoffs remain at low levels. The August trade balance dropped to $57.6 billion from $59.0 billion in July.
U.S. retailers reported poorer-than expected September same-store sales. Target, JC Penny cut their forecasts. September retail sales rose a slightly stronger than expected 0.6%. September core PPI rose a modest 0.1%, bringing the year-over-year increase down to just 2%.
Executive Summary
For the week, Nasdaq outperformed the other indices. DJIx was up by 0.19% and S&P 500 was up by 0.3%. Nasdaq was up by 0.91%. Apple, RIMM and Google supported Nasdaq. Crude oil prices closed the week at $83.69 a barrel after reaching a record high above $84. The yield on the 10-year note rose to 4.68% from 4.64% the previous week.
For the year, Dow is up by 13.1%, Nasdaq is up by 16.2% and S&P 500 is up by 10.1%.
The third quarter earnings season has kicked off. The major focus of the market in the coming weeks will remain on the fourth quarter earnings guidance.