PortfolioCrafter - Market Commentary 5/23/06
May 23rd, 2007 / 7:27 pm / by portfoliocrafter
Stocks ended lower after an afternoon sell-off sparked by comments from former Federal Reserve Chairman Alan Greenspan, who said that he feared a “dramatic contraction” in the Chinese stock market. The light volumes and a little tentative and nervous market is a result of the strong gains recently.
Today, the Dow Jones industrial average closed down 14.30 or 0.11% to 13,526.65, the S&P 500 index closed down 1.84 or 0.12% to 1,522.28, and the tech-fueled Nasdaq composite closed down 10.97 or 0.42% to 2,577.05.
Market breadth was positive. On the New York Stock Exchange, losers beat winners by 19 to 13 on volume of 1.6 billion shares. On the Nasdaq, decliners edged advancers 17 to 12 on volume of 2.0 billion shares.
Investors welcomed comments from Secretary Paulson that Chinese officials see the need for greater flexibility in the Yuan. Paulson also said the officials agreed there is a need to rebalance the Chinese economy so it is less dependant on exports. The growing trade deficit with China hit $235 billion last year, and U.S. businesses have complained that the cheap Yuan makes it too hard for them to compete with cheaper Chinese imports.
Stock of Alcan closed up $4.97 to $86.00, after turning down a nearly $28 billion unsolicited offer from Alcoa because the amount was too low. Shares of Alcoa closed up $1.32 to $40.27. Alcan is also in talks with BHP Biliton whose stock closed up $1.00 to $51.75, suggesting a potential bidding war could be brewing.
Shares of Target closed up after posting better-than-expected earnings of 75 cents a share but its revenue, at $14.04 billion, fell short of estimates. Analysts had expected on average, first-quarter earnings of 71 cents a share on revenue of $14.17 billion.
Stock of Morgan Stanley closed up $0.21 or 1.5% to $85.84, after it said that it is buying REIT Crescent Real Estate Equities for about $2.3 billion plus debt and preferred shares. This transaction offers a premium of roughly 5.4% to Crescent’s closing stock price of $21.62 Tuesday, and a 12% premium over its prior 30-day average closing price.
U.S. light crude oil for July delivery rose 27 cents to $65.78 a barrel on the New York Mercantile Exchange. Prices rose as U.S. naval action in the Middle East overshadowed a U.S. report showing higher refinery activity.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
