Market Round Up
Is the “occupy” movement over? Last week protestors in London were removed from St. Paul’s Cathedral where protestors had inhabited a tent city for weeks. While the New York occupiers demonstrated financial knowledge, London’s occupiers did not which impacted their message negatively. Unfortunately, neither the Occupy Wall Street nor Occupy London groups were able to provide an alternative system to governments that would meet their aims. What these Occupy movements did achieve was a shift in the public debate – and entry into political discourse – one of their key objectives.
Last week, BP reached a settlement with businesses and individuals who were impacted by the Gulf of Mexico oilspill in 2010. The pay out is expected to be worth an estimated $7.8 billion USD, and come from the fund BP set up in 2010 as a response to the spill. BP does face more lawsuits, and further payments of approximately $1-2 billion USD are still expected.
There is some expectation that the largest financial companies will be increasing their dividends this year. Most likely, however, it will be in the form of share buybacks. Buybacks are considered inferior to dividends, because companies typically only repurchase shares at high prices. They are also considered “safer” as share buybacks can be stopped, while dividends are obligatory once declared.
SNC-Lavalin Group Inc. dropped 20.6% on Tuesday, after delaying its Q4 results. This wiped out $1.5 billion from the company’s market capitalization. The company stated that “earnings were likely to be 18 per cent below previous guidance, and said that the company was investigating $35-million in undocumented payments.” This could impact the company’s reputation significantly; a problem given the company must bid (and win) its projects. That being said, the company’s earnings have risen steadily over the past decade.
The IPO (initial public offering – a launch into stock markets) of Yelp suggests that investors remain excited for social media companies. Yelp is an online review companies, which lets users review just about “anything and anyone.” Shares were priced at $15 USD, but climbed all the way to $26 USD on Friday, before closing at $24.58. Some have claimed Yelp is an “Amazon Sized Opportunity.”
North American Markets
The Dow hit 13,000 last week, and stayed up above that high mark this week after a strong report on US consumer sentiment resulted in a 0.2% gain on Tuesday. Both the S&P and TSX gained 0.3% Tuesday as well. Another benchmark was hit on Wednesday as the NASDAQ reached 3,000, an event unseen since December 2000 (and the dot com bubble). The NASDAQ composite is a stock market index of companies listed on the Nasdaq market and is typically used as an indicator of technology companies. Unlike the Nasdaq, Gold fell 71$ on Wednesday, experiencing its largest its largest one day drop this year. This, together with the Fed not suggesting future economic stimulus is on the way as expected, led to a drop in markets on Wednesday. While able to make up some of this loss Thursday, markets ended on a down note Friday following disappointing economic news from Europe.