Markets & Finance

Stocks: A First Half from Hell


Indexes rose slightly Monday, ending the worst month for the S&P 500 since 2002. It was the worst June showing for the Dow since 1930

Well, at least that's over with.

Monday's trading session ended one the most disappointing six-month periods in Wall Street's recent history. A small uptick in stock prices in the last few hours of trading of June could only put a band-aid on a nasty first half, a bruising second quarter, and an especially demoralizing past month.

The unhappy recap: Stocks dropped quickly at the start of the year, then seemed to hit bottom in March when investment bank Bear Stearns collapsed. But a rally in April and May fizzled, and June 2008 ended as one of the worst Junes on record -- the worst June performance for the Dow Jones industrial average since 1930, and the worst June for the S&P 500 ever.

The Dow has dropped 14.4% so far in 2008; Standard & Poor's 500-stock index has plunged 12.8%; and the tech-heavy Nasdaq Composite is down 13.6%.

Rather than recovering from problems earlier in the year, the stock market's momentum is negative, as indexes to be retesting their lowest points of the year, Mark Arbeter, chief technical strategist of Standard & Poor's, says. "If we don't get some help from the financials or crude oil, and their ominous trends continue, this range of support may get obliterated," he says. June was the worst one-month of the S&P 500 since September 2002, he added.

A modest retreat for oil prices and some better-than-expected economic data gave some stocks a slight lift early on Monday, but stocks gave up most of their gains by the end of the day. On Monday, the Dow added 3.5 points, or 0.03%, to 11,350.01. The S&P 500 gained 1.62 points, or 0.13%, to 1,280. But the Nasdaq added to the month's losses, falling another 22.65 points, or 0.98%, to 2,292.98.

Rumors about Lehman Brothers (LEH) added to the volatility. There was speculation that Barclays (BCS), the British bank, may be planning to buy Lehman at a discount to its current price. Lehman shares dropped 11%.

Oil hit a record high of $143.67 per barrel overnight, but retreated on Monday. On the NYMEX, crude oil for August delivery settled at $140 per barrel, 21 cents lower than Friday's close.

The June Chicago purchasing managers index, or PMI, was expected to fall in June but instead inched higher. The reading 49.6 beat May's PMI of 49.1. The employment index improved from 41.2 to 46.7.

For the month of June the Dow lost 10.2%, while the S&P 500 fell 8.6% and the Nasdaq was down 9.1%. More than four-fifths of the S&P 500 was in negative territory for the month, and almost half was down 10% or more. The worst performers included many financial and automotive stocks, while many of the market's best-performing stocks were in the energy sector.

It's "a market with pockets of extreme weakness and extreme strength, but the pockets of extreme weakness offset the extreme strength," says Gary Wolfer of Univest Wealth Management.

Among Monday's stocks in the news, H&R Block (HRB) impressed investors with earnings of $1.66 per share, beating a loss of 26 cents a year ago. The tax preparer says it expects to earn between $1.60 and $1.70 per share next year, which is above analysts' predictions. The firm also raised its annual dividend 5.3%.

Del Monte Foods (DLM) agreed to sell its seafood business, including StarKist, to Dongwon Enterprises for $363 million.

Campbell Soup (CPB) announced a $1.2 billion stock buyback program. The company expects 2008 earnings to be on the upper end of its previously announced 5% to 7% growth range.

Usana Health Sciences (USNA) says Gull Holdings and Unity Acquisition Corp. have raised their buyout offer from the company from $26 to $28 per share.

Solarfun Power Holdings (SOLF) entered into a long-term polysilicon supply deal with Jiangsu Zhongneng Polysilicon Technology Development Company. Also, Solarfun says it will buy the 48% of Jiangsu Yangguang Solar that it doesn't already own.

Major European indexes were mixed Monday. In London, the FTSE 100 index was up 1.74% at 5,625.90. In Paris, the CAC 40 gained 0.85% to 4,434.85, while Germany's DAX index slipped 0.06% to 6,418.32.

In Asia, Japan's Nikkei 225 moved 0.46% lower at 13,481.38, while Hong Kong's Hang Seng index added 0.27% to 22,102.01.

Treasury market

Treasury prices fell amid "lackluster trading," S&P's MarketScope says. The 10-year note fell 04/32 to 99-05/32 for a yield of 3.98%, and the 30-year bond also fell 04/32, trading at 97-17/32 for a yield of 4.53%.

Steverman is a reporter for BusinessWeek's Investing channel.

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