The last week that ended on Friday, 16 May, 2008 was mainly dominated by the crude oil and a plethora of economic news, majority of which disappointed. But a few reports also took investors by surprise. But the surprising part is despite that and crude on the verge of kissing another new time high of $128/barrel, the indices posted healthy gains for the week. The report that housing starts rose 8.2% in April to an annualized rate of 1.032 million units was perhaps the biggest surprise of the week. Friday's session, which included options expiration, also marked a fitting end to the week.

The Dow Jones Industrial Average gained 240 points for the week. Tech - heavy Nasdaq gained 83 points. S&P; 500 gained 37 points. In percentage terms the three indices gained 1.9%, 2.4% and 3.7% respectively.

Among major economic news hitting the week, the Labor Department reported that the consumer-price index rose 3.9% in the 12 months ended April. Excluding volatile food and energy prices, the core consumer price index increased 0.1%, against an expected 0.2%. Separately, April import prices rose 1.8% month-over-month, which was more than the expected 1.6% rise. March business inventories rose 0.1%, compared to the 0.5% increase in the prior month.

Encouraging economic data came in the form of new housing data. Seasonally adjusted annualized housing starts for April totaled 1,032,000, which is above the 939,000 that was expected. Annualized starts for March were revised from 947,000 to 954,000. Meanwhile, building permits for April jumped 4.9% to 978,000.

Separately, the University of Michigan issued its preliminary consumer sentiment survey reading for May, which came in at 59.5. The reading dropped month-over-month from 62.6 and was below the reading of 62 expected.

The retail sales report was also arguably the most pleasant surprise in this week's economic reports. April retail sales, excluding autos, rose 0.5%, beating estimates. This growth was not caused from an increase in gasoline sales, as gas station sales declined 0.4% in April. When including autos, retail sales fell 0.2%, which matched expectations.

Other than the above, jobless claims for the week ending 10 May totaled 371,000, which was largely in-line with expectations. Industrial production for April slipped 0.7%.

The Empire State Manufacturing Index for May came in at -3.2, which was a bit below the flat reading expected. Meanwhile, the Philadelphia Fed Survey, another regional manufacturing index, posted a reading of -15.6 for May. A reading of -19.0 was expected. Notably, the prior month's reading was unrevised at -24.9.

Earning reports slowed down during this week. Among major earning reports for the week, Dow component Hewlett-Packard which announced an acquisition of Electronic Data Systems for $13.9 billion, also reported preliminary fiscal second quarter results that topped consensus estimates. Numerous retailers also beat quarterly expectations. Wal-Mart was one of them. Department store operator Macy's reported an unexpected first quarter profit and reaffirmed its full year guidance.

Separately, Freddie Mac reported a sizable first quarter loss, yet its loss wasn't as great as feared and its stock rallied as a result, gaining 9% the day of the report.

In merger and acquisition news, media company CBS Corp. announced it will acquire Internet news company CNET Networks for $1.8 billion. Dow Jones component and industrial conglomerate General Electric announced it will be selling its appliance business. Yahoo shares also remained in focus with billionaire Carl Icahn planning to take over its board.

Executive Summary

For the week, indices registered substantial gains. DJIx and S&P; 500, each closed up by 1.9% and 3.7% respectively. Nasdaq closed up by 2.4%. The week was mainly dominated by the crude oil and economic reports.

The report that housing starts rose 8.2% in April to an annualized rate of 1.032 million units was perhaps the biggest surprise of the week. The retail sales report was also arguably the most pleasant surprise in this week's economic reports. April retail sales, excluding autos, rose 0.5%, beating estimates.

For the year, Dow, Nasdaq and S&P; 500 are down by 2.1%, 4.7% and 2.9% respectively.

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