Stocks Lose Their Oomph at the End
Updated from 4:13 p.m. EDT
Stocks in the U.S. gave up most of their big gains Monday, closing out the session mixed, after sudden strength in crude futures seemed to help deflate the effects of a relatively positive report on recent economic data.
The
Dow Jones Industrial Average
, which began the day on soft footing, was later up some 150 points before easing to a gain of 41.36 points, or 0.32%, at 13,028.16. The
S&P 500
edged up 1.28 point, or 0.09%, to close at 1427.63.
The
Nasdaq Composite
, however, lost 12.76 points, or 0.5%, to 2516.09, under pressure from
Microsoft
(MSFT) - Get Report
and some other suffering tech names.
The reversal came after crude oil flirted with the record it
set on Friday
, reaching an intraday high of $127.77 a barrel before receding to a gain of 76 cents at $127.05.
"It's bullish mania, baby," said Phil Flynn, vice president and senior market analyst with Alaron Trading. "We're playing the game, 'How high can it go?'"
Flynn noted that a number of oil traders are probably squaring their positions ahead of the futures expiration tomorrow. Some supply concerns may have had an impact today, he added, but he emphasized, "I think it's just pure and simple bullish momentum."
The Real Story Wrap: May 19 |
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Still, Ryan Detrick, senior technical strategist with Schaeffer's Investment Research, is skeptical that oil was entirely responsible for the equities reversal. "We're not reading much into it," he said. "We think it's simply intraday volatility, a potential simple selloff to resistance levels."
Detrick pointed out that the Dow "ran into problems" on May 2 at about the peak it hit today -- a level that's also roughly at the index's 200-day moving average. The S&P, he added, has also had trouble getting past its closely-watched 200-day of 1428.
Breadth was poor to start the week. Roughly 1.86 billion shares changed hands on the
New York Stock Exchange
, with declining issues outrunning advancers by nearly a 5-to-4 margin. Volume reached around 2.24 billion shares on the Nasdaq as losers topped winners about 3 to 2.
As for gold, futures on the metal closed up $5.90 at $905.70 an ounce. Nevertheless, the U.S. dollar remained stronger, firming by 0.4% against the euro to $1.5511 while adding 0.2% against the yen to fetch 104.34.
Earlier, stocks got a boost after leading indicators, a collection of mostly previously released economic data from the Conference Board, ticked up 0.1% in April -- the same as the prior month, and a hair better than expected. Ian Shepherdson, chief U.S. economist with High Frequency Economics, said the consensus overshot because most economists made their forecasts before Friday's stronger-than-expected numbers on building permits.
"These data certainly reflect a weak economy but not one in recession," said the Conference Board.
Art Hogan, chief market analyst with Jefferies, pointed out that much of what buoyed the overall figure were gains in the stock market. "So it's a self-fulfilling prophecy, to a certain extent," he said. In addition to rising equities and the housing permits, said the board, the interest rate spread also worked to outweigh harsh slides in average weekly hours and consumer expectations.
In corporate news, Microsoft, which earlier this month dropped its attempts to take out
Yahoo!
(YHOO)
, over the weekend presented the Internet-portal operator with a
that would not constitute an outright acquisition. The software giant added, however, that it "reserves the right to reconsider" another buyout offer.
Shortly before market close,
Reuters
reported that the proposal entails Microsoft buying Yahoo!'s search business and taking a minority stake in the company after Yahoo! spins off its Asian assets, according to a person familiar with the discussions.
The development comes amid billionaire investor Carl Icahn's looming threat to nominate 10 people to Yahoo!'s board. Icahn recently began amassing large amounts of Yahoo! shares, saying the company acted "irrationally" in turning down Microsoft's sweetened takeout bid earlier this month. Microsoft shares shed 1.8% as Yahoo! finished up 2 cents at $27.68, having backed off from a more robust early climb.
Staying in tech,
Garmin
(GRMN) - Get Report
slumped 5.3% on a Needham downgrade to hold from buy.
Among other falling names in the technology patch were
Apple
(AAPL) - Get Report
, down 2.1%, and
Hewlett-Packard
(HPQ) - Get Report
, which was off 1.2%.
SanDisk
(SNDK)
slid 7.5% to $30.02.
On the other hand,
Amazon.com
(AMZN) - Get Report
surged 7.6% after Goldman Sachs added the stock to its "Americas Conviction Buy" list and sharply lifted its price target to $98. Also,
Texas Instruments
(TXN) - Get Report
rose 2.3% after Citigroup upped the chipmaker to buy from hold.
Elsewhere on the equities side,
American Axle Manufacturing
(AXL) - Get Report
last Friday
with the United Autoworkers that would end a costly strike. American Axle is a key supplier to supplier to automaker
General Motors
(GM) - Get Report
, shares of which were up 0.9% to help prop up the Dow. American Axle shares lost 5%.
In earnings, home-improvement retailer
Lowe's
(LOW) - Get Report
said early Monday its
17.9% to $607 million, or 41 cents a share, a penny better than the average analyst estimate from Thomson Reuters. Same-store sales, or those from stores open a year or more, slid 8.4%, and the company also shaved down its full-year outlook. Shares were down 2.6%.
Meanwhile,
Campbell Soup's
(CPB) - Get Report
fiscal third-quarter earnings missed Street estimates by a penny a share, excluding a big gain from the sale of its Godiva business. Campbell's adjusted profit was down 7.8% to $165 million, or 43 cents a share. The stock sank 6.3%.
Back in analyst research, Citigroup upgraded
National City
( NCC) to buy from hold with a $7 price target, saying the bank's recent $7 billion capital raise gives it leeway to deal with its credit issues. Nat City shares climbed 5.4%.
However, Citi also cut earnings estimates for three brokerage firms --
Goldman Sachs
(GS) - Get Report
,
Lehman Brothers
( LEH) and
Morgan Stanley
(MS) - Get Report
-- which Citi says may face more losses due to a difficult operating environment. Shares of the companies all spent time in the green earlier, but ended down 1.5% or more.
In more negative calls,
Continental Airlines
(CAL) - Get Report
lost 6% after JPMorgan cut the stock to underweight. Friedman Billings downgraded
American Eagle Outfitters
(AEO) - Get Report
to market perform while easing its price target on another clothing retailer,
Abercrombie
(ANF) - Get Report
. Shares slumped 3.7% and 1.9%, respectively.
As the equities environment became less certain late in the session, Treasury prices crept back into positive territory. The 10-year note rose 4/32 in price to yield 3.8%, and the 30-year bond ticked up 2/32 in price, yielding 4.57%..
The major overseas markets were almost uniformly higher. In Asia, Tokyo's Nikkei 225 added 0.4% overnight, and Hong Kong's Hang Seng Index was ahead by 0.5%. Among European bourses, the FTSE 100 in London tacked on 1.2%, and Germany's Xetra Dax was better by 1%. The Paris Cac bounced 1.3%.