Media and entertainment stocks weathered a roller coaster ride in the turbulent financial markets last week.
While the threat of war in the Persian Gulf sent stock prices plunging as President Bush’s Jan. 15 deadline neared, the outbreak of war and the positive reports out of the region sent stocks soaring Jan. 17 in Wall Street’s heaviest trading session in more than three years.
Investors proceeded more cautiously Jan. 18 following news of Iraq’s attack on Israel but gave the market another up day in lighter trading.
Media and entertainment stocks’ gains mirrored those of the broader market. The Variety/Furman Selz Entertainment Composite posted a 5.8% over the week compared with the S & P 500 Index, which was up 5.4%
“Larger media and entertainment stocks, which are included in many of the index funds, benefited from gains in the overall market once program trading set in,” says entertainment analyst Christopher Dixon, Kidder, Peabody & Co.
Walt Disney Co., whose stock price had been dropping on investors’ fears that recession coupled with rising oil prices could significantly dampen attendance at the company’s theme parks, posted a $7.63 (8%) a share gain last week to close Jan. 18 at $103.13.
Dixon notes that highly leveraged companies – like Time Warner Inc., whose debt is comprised largely of floating rate loans – are benefiting from dropping interest rates. Time Warner added $6.50 to its share price to close the week at $87.38 a share, a gain of 8%.
Of all Variety/Furman Selz indices, Independents posted the biggest gain for the week, up 11.2%.
Cable stocks, which have languished over the past year amid concerns over the possibility of reregulation, also made a strong showing; the Variety/Furman Selz Cable Operators Index finished up 9.1%.
Despite the buying frenzy, some money managers were warning investors about getting too excited over the market’s longer term prospects. They say that despite the current up tick, a deepening recession will continue to exert downward pressure on the market.