MarketView for June 8

Summary

Trading on Wall Street ended the day on Friday with a rally that resulted in the Street chalking up its best weekly gain of the year on word that Spain was expected to ask the euro zone on Saturday for money to bail out its troubled banks. If the scenario unfolds as expected this weekend, Spain would become the fourth country to seek aid since Europe's debt crisis began. That could go a long way toward ending the uncertainty and worry that Spain's banking woes could prolong a downturn in the euro zone into recession and hurt the U.S. economy for the foreseeable future.

Five senior European Union and German officials said euro-zone deputy finance ministers would hold a conference call on Saturday morning to discuss Spain's request for help to recapitalize its banks. This was seen as an effort to stem the tide of worsening market turmoil.

President Barack Obama said on Friday that European leaders face an "urgent need to act" to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic U.S. recovery.

For the week, the Dow had a gain of 3.6 percent, the S&P 500 was up 3.7 percent and the Nasdaq gained about 4 percent - the best weekly percentage gains for all three indexes since December.

A Commerce Department report showed wholesale inventories rose a greater-than-expected 0.6 percent in April to a record $483.5 billion. Business inventories added only 0.21 percentage point to economic growth in the first quarter, but Friday's report suggests they will be a bigger factor in the second.

As the euro zone's fiscal troubles grew worse in recent weeks, it even took a toll on companies such as McDonald’s. Underscoring the impact of Europe's debt crisis, McDonald's reported a lower-than-expected rise in global same-store sales in May and warned that austerity measures in Europe were taking a toll. McDonald's stock fell 0.7 percent to $87.75, causing it to be the largest drag on the Dow.

Stocks' strong gains came about a week after the benchmark S&P 500 index fell more than 6 percent in May and dropped just below its 200-day moving average, signaling a technical bounce for equities. However, the rally took place on light volume with only about  6.2 billion shares changing hands on the three major equity exchanges, as compared with the year-to-date daily average of 6.85 billion shares.

Shares of Facebook were up 3 percent to close at $27.10. Meanwhile, CNBC reported that Swiss bank UBS may have lost as much as $350 million from trading Facebook's stock amid the confusion of the social network's glitch-ridden debut on May 18.

Though financials gained steam late in the session, telecommunication shares were the day's best performers, as exemplified by Verizon, up 1.9 percent to close at $42.44

Among other names in the news, Chesapeake Energy plans to sell its pipeline and related assets to Global Infrastructure Partners in three separate transactions worth more than $4 billion, as the company scrambles to plug an estimated $10 billion funding shortfall.

In addition, Chesapeake shareholders delivered a broad rebuke of the company's board, withholding support for two members up for re-election in the wake of a governance crisis and poor financial performance. Chesapeake's stock gained 2.9 percent to $18.36.

Best Buy founder and Chairman Richard Schulze resigned from the retailer's board on Thursday and said he was exploring options for his 20.1 percent ownership stake, a move seen as a possible precursor of a Schulze-led private takeover. Best Buy's stock rose 2.3 percent to $19.98.

Trade Deficit Narrows

A report by the Commerce Department released on Friday indicated that our trade deficit narrowed in April as slower growth in Europe and China cut into exports and the soft economy clipped import demand. The difference between exports and imports shrank by 4.9 percent to $50.1 billion, with exports falling 0.8 percent from last month's record level to $182.9 billion, the Commerce Department said. Imports dropped 1.7 percent to $233.0 billion.

Both imports and exports were still the second-highest on record. Meanwhile, revisions to earlier trade data suggested economic growth in the first quarter was stronger than previously estimated. UBS Securities said GDP growth would likely be revised up to a 2.3 percent annual rate from 1.9 percent.

Exports to the 27-nation European Union fell 11.1 percent in April to $22.3 billion, but for the first four months of 2012 were 3.5 percent above the same period last year. The EU was the United States' second-largest export market last year.

Exports to China, where growth is also slowing, fell 14 percent in April. On Thursday, China's central bank cut interest rates for the first time since the global financial crisis in a bid to bolster growth. China has been one of the fastest-growing markets for goods, and exports to that country were up 4.3 percent for the first four months of 2012.

The drop in overall exports in April mainly reflected less foreign demand for capital goods, such as aircraft, drilling equipment and machinery, and industrial supplies and materials, which range from cotton to chemicals.

The value of imports fell despite an increase in the average price of imported oil to $109.94 per barrel, the highest since August 2008. The volume of oil imports also rose slightly. Oil prices have fallen sharply in recent weeks, suggesting the nation's energy import bill could drop.

Imports from the EU slipped 11.1 percent to $31.0 billion, while imports from China rose 4.8 percent to $33 billion. By category, capital goods and industrial supplies and materials led the import decline. The United States imported a record $5.5 billion worth of goods and services from South Korea in April. A free trade pact between the two countries went into force on April 15.