przez queba » 2007-09-22, 19:29
Wall St enjoys best week in six months
By Michael Mackenzie and Chris Bryant in New York
Published: September 21 2007 14:04 | Last updated: September 21 2007 22:22
Wall Street stocks had their best week for six months after the Federal Reserve surprised markets by slashing interest rates by half a percentage point.
The S&P 500 on Tuesday enjoyed its biggest one-day gain since March 2003 as investors bet that low interest rates would lend support to the US economy.
The decision to cut both the Fed Funds rate and the discount rate – the rate at which banks can borrow directly from the Fed – appeared to calm equity markets as share volatility eased.
The Chicago Board Options Exchange Volatility index, a measure of future market volatility, fell 24 per cent to lows last reached at the end of July before the credit squeeze.
Trading volumes were high on the week and on Friday the New York Stock Exchange set a new volume record for the first hour of trading.
Equity markets surged even as the dollar fell to a new record low against the euro.
The CurrencyShares Euro Trust exchange traded fund, which tracks the price of the euro, closed the week at an all-time high.
The S&P 500 was 2.8 per cent higher on the week at 1,525.72, within 1.8 per cent of its all-time high, set in July. The Dow Dow Jones Industrial Average closed up 2.8 per cent at 13,820.19 while the Nasdaq Composite was up 2.7 per cent at 2,671.22.
Large-cap companies saw particularly strong gains. The Russell Top 50 index of the largest US companies by market capitalisation hit its highest level since 2001.
“I’m surprised at the strong snap back – it’s almost like we discounted everything that happened over the last three months,” Joe Ranieri, managing director of trading of Canaccord Adams, said. “The weaker dollar is going to be good for earnings at the larger cap companies, particularly in the tech sector.”
The Nasdaq was lifted on Friday by some positive earnings news from Oracle and details of a share buyback by Texas Instruments.
Google set a new all-time high, up 5.9 per cent for the week at $560.10.
However, it was a disappointing week for Microsoft, down 1.3 per cent to $28.65, after a European court upheld a European Commission ruling that the software group had abused its near-monopoly position.
Oracle reported a 25 per cent rise in quarterly profit. The stock was up 9.5 per cent on the week at $21.98.
Texas Instruments was 5.6 per cent higher at $36.62 after its board approved a $5bn share buyback programme and announced plans to raise its cash dividend by 25 per cent.
In other earnings news, Nike said quarterly profit rose 51 per cent. Shares in the athletic shoe and clothing company were flat for the week at $57.26.
The week’s earnings news was dominated by the brokerage sector as Lehman Brothers, Morgan Stanley, Goldman Sachs and Bear Stearns turned in their third-quarter report cards.
Goldman and Lehman surprised the market with better-than-expected earnings, up 10.2 per cent to $209.98 and 5.4 per cent to $62.70 on the week, respectively.
But Bear Stearns and Morgan Stanley disappointed.
Shares in Morgan, which reported a 17 per cent third-quarter profit decline, were down 2.5 per cent on the week at $64.44. Bear’s earnings fell 61 per cent after fixed-income revenues plummeted but its shares ended the week flat at $117.32.
Transport stocks lagged the market as crude oil set a series of record highs.
FedEx, down 4.7 per cent at $104.10, cut its earnings forecast for the year due to higher energy costs and uncertainty about the near-term economic outlook.
Shares in Harman International Industries plunged 21.3 per cent to $85.
The company confirmed rumours that Goldman Sachs and KKR would not complete their planned $8bn purchase of the audio equipment maker.
Mattel, up 6.6 per cent at $23.94, finished the week with an apology to the Chinese people for damaging the reputation of their manufacturers after the recall of around 21m toys. On a visit to Beijing, Thomas Debrowski, executive vice-president of worldwide operations, said the majority of toys were recalled because of design flaws, not poor Chinese manufacturing.
It was another volatile week for homebuilder stocks as positive news about the relaxation of regulation of mortgage lenders was overshadowed by more downbeat data on housing starts, which declined 2.6 per cent in August. But the S&P materials index recorded strong gains as investors bet on the continuing strength of the global construction boom.