MarketView for June 10

Summary

There was little in the way of interesting activity on Wall Street on Tuesday as the equity markets ended the day nearly flat, although the Dow Jones industrial average id mange to eke out another record close as utilities' shares fell while 10-year bond yields hit their highest level in a month. It was the Dow's fourth straight record closing high. The S&P 500, though, broke its four-day string of record highs. The benchmark S&P 500 index moved within a confine of less than 7 points.

Six of the 10 primary S&P 500 sector indexes ended the session lower. The decline was led by a 0.3 percent drop in the S&P utilities index. Utility shares tend to lose some of their appeal when contrasted with higher interest rates.

Shares of eBay fell 2.7 percent to end the day at $48.25, making it the second largest drag on the S&P 500. The stock's slide came after news late Monday that David Marcus, who has led eBay's fast-growing payments unit PayPal for the past two years, will step down this month to run Facebook's messaging products. Facebook ended the day up 4.6 percent to close at $65.77.

Besides Facebook, other momentum stocks ranked among the day's best performers, including Netflix, up 1.2 percent at $428.29.

Strategists at Bank of America Merrill Lynch slightly reduced their recommended equity allocation for clients with a moderate risk tolerance, reflecting a bit more cautiousness, but still remained positive on stocks, according to a note. The firm's Resource Investment Committee said it cut its equity allocation for moderate-risk clients by 2 percentage points to 66 percent.

The CBOE Volatility Index ended down 1.4 percent at 10.99. Further evidence of the low volatility and the slow grind in the market: The 14-day Average True Range, a technical analysis volatility indicator originally developed by J. Welles Wilder, Jr to indicate the degree of price volatility for the S&P 500 hit 10.09, the lowest level for that indicator since February 2013.

Achillion Pharmaceuticals was among the Nasdaq's most-active names, rising 83.3 percent to $7.79. The company said on Tuesday that the Food and Drug Administration let it resume the development of one of its hepatitis C drugs. JMP Securities upgraded the stock to "market outperform" from "market perform."

The biotech sector also received a lift from Receptos, which rose up 36.8 percent to $39.94 after the company's experimental multiple sclerosis drug met its main goal in a mid-stage trial.

Volume was once again below average with approximately 5.2 billion shares changing hands on the major equity exchanges, a number that was below the 5.76 billion share average for the last month, according to data from BATS Global Markets.

Wholesale Inventories Rise

The Commerce Department reported on Tuesday that wholesale inventories rose more than expected in April, which could lead to a sharp acceleration in economic growth during the second quarter. According to the Department wholesale inventories increased 1.1 percent after advancing by the same margin in March. The gain exceeded Street expectations, which was for a 0.5 percent gain.

Inventories are a key component of gross domestic product changes. The component that goes into the calculation of GDP - wholesale stocks excluding autos - increased 1.1 percent. The sharp slowdown in the pace of restocking by businesses helped to sink economic growth in the first quarter, but a swing in inventories is expected in the April-June period.

Data last week showed a rise in stocks at manufacturers in April and further gains are likely after an increase in automobile sales in May depleted stocks of some vehicle models.

The economy contracted at a 1.0 percent annual pace in the January-March period as inventories subtracted 1.6 percentage points from GDP. Growth this quarter is forecast topping a 3.0 percent pace, but the sturdy gains in wholesale inventories in April could prompt some economists to raise their GDP estimates.

Sales at wholesalers increased 1.3 percent in April after rising 1.6 percent the prior month. At April's sales pace it would take 1.18 months to clear shelves, unchanged from March.