MarketView for May 12

Summary 

A quick gain in the morning followed by negative numbers for most of the rest of the day had the day’s trading activity looking pretty gloomy until a late in the day rally sent the Dow Jones industrial average well into positive territory as investors scooped up defensive shares, including Pfizer, while energy companies' stocks climbed as oil hit a six-month high. However, the S&P 500 index was little changed and the Nasdaq fell as financial and technology shares declined.

Shares of Pfizer posted the largest percentage gain within the Dow, rising 5.5 percent to $14.93, after positive comments from analysts at Credit Suisse First Boston following a meeting with the drug company's management. Pfizer’s rival and fellow Dow component Merck gained 2.4 percent to close at $24.98.

Energy shares also supported the market as crude oil futures briefly touched $60 a barrel before settling up 35 cents at $58.85 on hopes an economic recovery may bolster fuel demand. As a result the shares of Exxon Mobil ended the day up 2.2 percent to close at $70.82.

Coca-Cola ranked among the Dow's largest advancers, up 3.9 percent at $44.40 as consumer staples shares also benefited from the move into defensive stocks.

On the downside, shares of Ford fell 17.6 percent to $5.01, a day after the automaker announced an offering of 300 million shares, while the Bank of New York Mellon said it sold $1.2 billion of common stock and its shares lost 3.8 percent to close at $28.43. Investors worried that the new offerings were dilutive to existing shareholders as companies tried to raise cash to stay afloat, but others noted the ability to attract capital was a positive sign.

Bank of America was the Dow's biggest drag, down 5.3 percent at $12.26. The word on the Street is that Bank of America has apparently sold $7.3 billion of China Construction Bank shares to a group of investors..

Big-cap technology companies weighed on the Nasdaq, including, which lost 4 percent to close at $124.42.

In economic news, data showed our trade deficit number widened in March for the first time in eight months, signaling weak overseas demand.

Crude At 6-Month High

The price of crude oil rose to a six-month high on Tuesday on the premise that a forthcoming economic recovery will result in rising fuel demand. In addition there was some hedging taking place because of a weaker dollar.

Domestic sweet crude futures for May delivery settled up 35 cents per barrel at $58.85 after earlier reaching $60.08 per barrel, the highest price for crude oil since November. Oil trimmed earlier gains after the Department of Energy cut its 2009 oil demand forecast. London Brent crude settled up 46 cents per barrel at $57.94.

The dollar fell to a four-month low against a basket of world currencies as investors with higher appetite for risk sold dollars, often considered a safe haven. Oil futures are priced in dollars and often rise if the U.S. currency weakens.

Memorial Day holiday travel is likely to rise by 1.5 percent this year from 2008, travel and auto group AAA said on Tuesday. Motorists will drive more this year during the three-day weekend, which ends May 25, AAA forecast.

Oil prices briefly dipped into negative territory after the EIA released its monthly forecast for May, which revised down a 2009 forecast for global demand by 420,000 barrels per day (bpd) from last month's report.

Oil has fallen from record highs of more than $147 a barrel struck in July 2008, as the economic crisis hits demand. But a recent rally in equities has helped lift oil prices from below $34 a barrel in February.

EIA data to be released on Wednesday is forecast to show a further rise in crude oil stocks, currently at 19-year highs. If fact, crude stockpiles probably rose for the 10th straight time last week, up by 1.4 million barrels. Distillate stocks are likely to have risen by 1.3 million and gasoline stocks by 100,000 barrels.

Positive Comment From Intel

Intel Corp's orders and billing patterns so far in the second quarter have been slightly better than expected, Chief Executive Paul Otellini said on Tuesday.

"We are halfway through Q2," Otellini told investors. "In terms of our order pattern and our billing pattern, it's a little better than expected," he said.

Otellini added that second-quarter sales are dependent on the month of June, but "so far, so good."

Shares of Intel rose 4 percent to $15.80 in after-hours trading, from their Nasdaq close of $15.21.