Background Information
Share is the evidence of ownership that represents an equal proportion of a firm’s capital. It entitles its holder (the shareholder)to an equal claim on the firm’s profits and an equal obligation for the firm’s debts and losses. Two major types of shares are (1) ordinary shares(common stock), which entitle the shareholder to share in the earnings of the firm as and when they occur, and to vote at the firm’s annual general meetings and other official meetings, and (2)preference shares (preference stock)which entitle the shareholder to a fixed periodic income(interest)but generally do not give him or her voting rights. A stock(also known as an equity or a share)is a portion of the ownership of a corporation. A share in a corporation gives the owner of the stock a stake in the company and its profits. If a corporation has issued 100 stocks in total, then each stock represents a 1% ownership in the company.
Wall St. Unfazed by Stress Test Details
Investors are unlikely to know the results of the government’s stress tests of major banks until May 4, but Wall Street cleared one hurdle on Friday. stocks did not lose their footing after regulators laid out how they were conducting the assessments. Shares pushed higher even though few details were forthcoming on the ratios and metrics being used to determine whether banks need to raise more capital. Still, investors speculated that most of the 19 financial institutions were well capitalized and would not need huge new infusions of capital from private investors or the government.
The Dow Jones industrial average rose 119.23 points, or 1.5 percent, to 8 076.29. The Standard & Poor’s 500-stock index climbed 14.31 points, or 1.68 percent, to 866.23. The Nasdaq composite index gained 42.08 points, or 2.55 percent, to 1 694.29.
But even with the day’s gains, stocks were slightly lower for the week, breaking a six-week winning streak. The Dow Jones industrial average fell 0.7 percent for the week, while the Standard & Poor’s 500 dropped 0.4 percent. Even so, the Nasdaq composite index rose 1.3 percent.
Energy companies and producers of basic materials led the market, as commodities like Copper and sugar gained ground and oil prices rose above ＄50 a barrel, buoyed by hopes that the economic decline was slowing. Crude oil for June delivery settled at ＄51.55 a barrel, up ＄1.93.
Investors, who had braced for grim news about corporate earnings, cheered less-bad reports from some major American companies.
The automaker Ford Motor reported a ＄1.4 billion loss for the first quarter, but said it was spending money at a slower pace and did not expect to seek government aid. Two of its competitors, General Motors and Chrysler, have taken billions in government money, and both are facing the possibility of bankruptcy.
Shares of Ford rose 51 cents, or 11.36 percent, to ＄5. After slipping to less than ＄2 in February, Ford’s stock has rebounded as investors bet that the company is better positioned than its rivals.
American Express and Microsoft also surprised investors after the markets closed on Thursday.
American Express reported net income of ＄437 million in the first three months of the year, beating analysts’ forecasts. It said it hoped to repay the government’s financial bailout money once regulators finished conducting stress tests on the company’s health.
Shares of American Express gained ＄3.33, or 20.7 percent, to ＄25.30, pacing other companies in the financial sector on Friday. Shares of major banks like Bank of America and JPMorgan Chase rose, but Citigroup declined as investors read through the Fed’s 21-page summary of how it conducted the stress tests.
Shares of Microsoft gained ＄1.99, or 10.5 percent, to ＄20.91. The personal computer company said Thursday that both earnings and revenue fell, but investors took solace from Microsoft’s cost-cutting efforts.
Meanwhile, the Commerce Department reported that new orders for durable goods fell 0.8 percent in March, after a 2.1 percent increase in February. Although it was the seventh decline in eight months, economists had been expecting an even steeper drop of 1.5 percent, and saw a silver lining in a 4.4 percent rise in new orders for civilian aircraft.
A report on sales of new homes in March said they were down again, but less than expected. Sales of new single-family homes fell to an annual rate of 356 000, a decline of 0.6 percent from February and 30.6 percent below last year. Wall Street had expected an annual pace of 337 000 in sales.
Prices for government debt dropped sharply, pushing yields on the benchmark 10-year Treasury note to 2.99 percent, up from 2.92 Thursday. The price, which moves in the opposite direction from the yield, fell 19/32, to 97 31/32.
Analysts say that investors who had flocked to safe-haven government debt at the height of the financial crisis are now looking for greater returns in corporate bonds and municipal debt, and growing wary about the vast new supplies of Treasuries that will hit the market as the government raises money to finance its huge stimulus projects.
Vocabulary
Exercises Multiple Choices.The performance of ______ is out of expectation.