Weekly Market Review 08-06-2004

Terrorism, Oil Prices and Jobs Report Send Markets Lower
By Rick Paler


The stock market continued to decline this week on higher oil prices and a poor Non-Farm Payrolls Report. This caused the DOW, S&P 500 and Nasdaq to close the week at new lows for the year. Oil again this week hit record highs as traders pushed the price of crude on supply fears and terrorism concerns.

Terrorism was in the news again when a car bomb exploded just outside of Athens Greece leading to fears of a terrorist attract during the Olympic games that begins at the end of next week. The department of Homeland Security also announced that financial institutions in the United State are key targets for Al Queda. This led to a raising of the terror alert to high in New York, Washington D.C. and New Jersey. Additional targets were identified in San Francisco, but the terror threat for San Francisco and the rest of the nation remained unchanged at Elevated.

OPEC President Purnomo Yusgiantoro raised concerns with traders when he announced that Saudi Arabia’s planned product increase could not go through as early as planed. Traders were also shocked when Russia’s Justice Ministry said that Russian oil giant Yukos (YUKOY) would not be allowed to use frozen funds to pay for their day-to-day operations reversing their previous statements. Yukos has been in a battle with the government over paying past taxes.

Non-farm Payrolls disappointed Wall Street when it was announced that an mere 32, 000 jobs were created in July when economist had expected job growth in July on 243, 000 new job. This was the slowest job growth in eight months. This came on the back of last months disappointing numbers.

The week was not all bad news though. Earnings continue to surprise on the upside for the second quarter. 82% of the S&P 500 companies have now released their earnings for the second quarter. Of the companies that have reports to date, 69% of the companies have beat analyst earnings expectations with only 14% missing their earnings target. Overall earnings for the S&P 500 are now running at a 28% growth rate over a year ago.

In economic news the Non-Farm Payrolls Report disappointed, but the unemployment rate and weakly jobless claims came in better then expected. The unemployment rate came in at 5.5%, when economist had expected the rate of unemployment to stay unchanged at 5.6%. Weekly initial jobless claims fell unexpectedly to 336,000 from the estimated 340,000. Next week all eyes will be on the FOMC meeting on Tuesday to see if the Federal Reserve will again take action to raise interest rates.

In corporate news this week, Fifth Third Bancorp (FITB) announced that it had entered into an agreement to purchase First National Bankshares of Florida (FLB). Under the terms of the agreement First National Bankshares of Florida will be acquired for approximately $1.6 billion or $25.00 per share.

Proctor & Gamble (PG) announced earnings that exceeded the Streets estimates of $0.48 per share. The company earned $0.50 per share and sales climbed 19% to $13 billion. The company also announced that it expected their earnings to continue to growth at a double digit pace for 2005.

Tenet Healthcare continues to struggle. The company announced that they lost $0.06 per share versus the consensus of a $0.01 per share loss. Compounding their problems, the company announced that they received a subpoena from the U.S. Attorney’s Office and their CFO will resign.

Bond yield fell across the yield curve as traders flocked to bonds. The 5 year Treasury note closed at 3.37%. The 10 years yield closed lower at 4.21% and the 30 year bond fell to 5.03%.

Next week companies releasing earnings that are of interest include the following; Church & Dwight Co., Inc. (CHD), Cisco Systems (CSCO), UBS (UBS), Walt Disney (DIS), Target Corporation (TGT) Dell (DELL) and Wal-Mart Stores (WMT).