MarketView for May 22

Summary 

Once again the markets declined late in the trading day, sending all three major equity indexes into negative territory for the day. The decline was basically the seemingly never ending concern over the budget deficit. Those concerns also sent both the dollar and Treasury prices lower.

Shares of big manufacturers such as Caterpillar fell 3.5 percent to close at $34.31, as were some of the big banks, with Bank of America closing down 3 percent at $11.07. However, multinationals and commodity companies limited the losses as shares of companies in sectors that could benefit from the weaker dollar, while energy shares climbed on bets overseas demand would support energy prices.

A good example is McDonald's, which closed up 2.5 percent to $57.08 and proved out to be the largest gainer for the Dow Jones industrial average. Shares of gold producer Newmont Mining was also higher, ending the day up 0.9 percent to close at $47.04. Gold, a traditional safe haven, hit a fresh two-month high, rising above $960 an ounce for the first time since late March.

On the Nasdaq, big-cap technology shares led the index lower. Apple fell 1.4 percent to $122.50 and Qualcomm was down 0.9 percent, closing at $41.31. At the same time, the Chicago Board Options Exchange Volatility Index .VIX, also known as Wall Street's fear gauge, climbed 4.1 percent and remained well above 30, a key psychological level, according to analysts.

For the week, stocks finished moderately higher, with the blue-chip Dow average up 0.1 percent, the S&P 500 chalking up a gain of 0.5 percent and the Nasdaq 0.7 percent higher.

Domestic sweet crude futures for July delivery settled up 62 cents per barrel, or 1.02 percent, to settle at $61.67. That, in turn, sent Exxon Mobil up 0.6 percent to close at $68.83,

With the long Memorial Day holiday weekend approaching, volume was light on the New York Stock Exchange, adding to the session's volatility. The financial markets will be closed on Monday.

Bernanke Tells Students To Keep The Faith

Federal Reserve Chairman Ben Bernanke told law school graduates on Friday that the recession-mired U.S. economy would recover and to remain optimistic about their job prospects. "Things usually have a way of working out," he told the graduating class of the Boston College School of Law.

The Fed chairman broke no new ground on the outlook for monetary policy in a speech that described his path to leadership of the U.S. central bank.

Bernanke cautioned students they are entering a weak labor market and will encounter "trying" economic conditions, but said the Fed is striving to rebuild stability and foster growth.

"Restoring economic prosperity and maximizing economic opportunity are the central focus of our efforts at the Fed," he added.

The Fed chair told students to disregard pessimistic commentary about the future of the U.S. economy and its role in the world.

"The economy will recover -- it has too many fundamental strengths to be kept down for too long -- and the mood will brighten," he said.

Bernanke offered up wisdom from several sources. Included were Bank of England Governor Mervyn King, “The object of central banks should be to make monetary policy as boring as possible,” Louis Pasteur, "Chance favors the prepared mind," and John Lennon, "Life is what happens to you while you are busy making other plans."