MarketView for March 8

Summary 

An upbeat profit forecast from Bank of America and a pullback in the price of oil sent share prices higher on Tuesday in another sign of the market's near-term resilience. The S&P 500 rose back above a six-month trend line after closing just below it on Monday. Holding this level is a sign of strength. Similarly, the Nasdaq composite index rallied from its 50-day moving average in another indication of an uptrend, although trading volume was lackluster.

Bank of America saw its share price increase 4.7 percent to $14.69 after it forecast pretax profit of about $40 billion annually longer term, higher than some investors had expected.

Financial shares led gainers. Oil prices pulled back, with Brent crude down nearly 2 percent at $113.06 a barrel after Kuwait's oil minister said OPEC was in discussions to increase production.

The S&P has advanced more than 25 percent since a rally started in September. On Tuesday the index moved back above a trend line that connects lows in late August and late November. Another technical indication of the market's resilience was the Nasdaq's keeping above its 50-day moving average.

Turmoil in Libya and unrest in the region had driven up oil prices to 2 1/2-year highs before the talk of OPEC considering a production boost. Stocks have been closely tied to oil prices recently as investors worry that consumer spending may be curtailed by higher oil and gasoline prices, choking off an economic recovery.

Helping homebuilders, Credit Suisse upgraded MDC Holdings, writing that it expects the homebuilder to show improved operating results in 2011. The stock rose 11.1 percent to $27.55. Meanwhile, the Pulte Group closed up 8.4 percent at $7.09.

On the negative side, shares of Netflix fell 6.8 percent at $195.45 after Warner Bros Digital Distribution said it would make some of its films available on Facebook. Netflix has been among the market's top performers in the recent rally and risen 56 percent since the start of September.

Combined volume on the three major exchanges was 7.57 billion shares, well below last year's daily average of 8.47 billion.

Crude Prices Fall

Oil fell on Tuesday, with Brent down nearly 2 percent after Kuwait's oil minister said OPEC was considering a production boost as war-torn Libya's output remained disrupted and the region's unrest fueled concerns about more supplies being cut off. Saudi Arabia has offered to help make up for Libya's shut output, estimated at about 1 million barrels per day of its normal 1.6 million bpd.

"We are in consultations about a potential output increase," Kuwait's Sheikh Ahmad al-Abdullah al-Sabah told reporters. But he added that the group had taken no decision yet to produce above existing output targets.

The Organization of the Petroleum Exporting Countries has left official policy steady for more than two years, yet output has been informally rising. Saudi oil minister Ali Al-Naimi and others in OPEC said world oil markets were sufficiently supplied. Naimi said the kingdom held 3.5 million bpd of spare production capacity to meet any shortages.

Algeria's oil minister said he sees no supply deficits and Iran's OPEC governor downplayed the discussions, saying consumer worries were mostly "psychological."

With protesters in Kuwait gathering on Tuesday and calls for more Saudi protests later this month, investors remain on edge about unrest in the region.

Goldman Sachs raised its oil price forecast and said it believed Saudi Arabia already had used up more of its surplus capacity than is widely thought.

Brent crude for April delivery fell $1.98 to settle at $113.06 a barrel, having fallen as low as $112.13. Domestic West Texas Intermediate futures for April delivery fell 42 cents to settle at $105.02 a barrel, above an early $103.33 low. Brent's premium to the U.S. benchmark ended post-settlement trading down $1.79 at $7.96 a barrel, down from a record of more than $17 last week.

Gasoline and heating oil futures also settled lower, declining in line with the Brent contract. High gasoline prices may be hitting retail demand, which fell 1.8 percent last week against the previous week and was lower against a year ago, MasterCard said.

Domestic crude stockpiles rose 3.8 million barrels last week, with gasoline stocks falling 3.7 million barrels and distillate stock dropping 1.5 million barrels, the American Petroleum Institute said in a report released late Tuesday. Oil futures prices showed little reaction to the API data.