MarketView for May 16

Summary 

The major equity indexes were lower on Monday, as investors took profits off the table in a sign of growing unease with economic weakness within some areas of the economy. On Monday, a gauge of manufacturing in New York State slid much more than expected in May to its lowest level in five months, the New York Federal Reserve said.

Furthermore, concerns over the market's ability to extend current rally have increased. The expected end to the Federal Reserve's stimulus program next month and the recent collapse in commodity prices have had many taking this opportunity to sell more volatile stocks that have outperformed in 2011.

Amazon lost 5 percent to close at $192.51, along with "high-beta" names including Priceline, down 3.3 percent to close at $503.38, and Netflix, down 3.8 percent and closing at $237.09. Priceline is up 26 percent since the start of the year, while Netflix is up 35 percent.

Tech and consumer-related shares were the largest drags on the S&P 500, and their losses outweighed gains in defensive sectors such as health care and utilities. Nonetheless, the S&P 500 index is still up about 27 percent since the start of September. Furthermore, share prices could continue to move higher in the near term as those chasing performance keep on buying. However, recent price action portends further market weakness, some analysts say. The S&P 500 ended a tad below key near-term support of 1,330, closing at its lowest since April 19.

Among some of the most discouraging corporate results, Lowe's reported weaker-than-expected quarterly earnings and cut its forecast for the year, sending shares down 3.6 percent to close at $24.84. Financials helped stem the Dow's losses, including American Express, whose shares were up 1.2 percent to close at $50.07.

In the euro zone, finance ministers are likely to back a bailout package for Portugal, with new conditions set by Finland. During a meeting, euro-zone officials were expected to pressure Greece to announce more austerity steps to secure further emergency funding.

In other earnings news, shares of J.C. Penney fell 3.2 percent to $37.21 after the department store operator reported a higher quarterly profit as the shares retraced some of their recent gains.

About 6.85 billion shares traded on the three major equity exchanges, as compared with an average of 7.73 billion shares so far in 2011.

Gross Says PIMCO "never" Short Treasuries

Bill Gross, manager of top bond fund PIMCO, said on Monday it was a "misconception" that the firm was betting against U.S. Treasuries, despite his concerns about the U.S. fiscal outlook.

"We, in fact, were never short Treasuries, we're very underweight Treasuries, let's put it that way," Gross, the co-chief investment officer of PIMCO, said in an interview with CNBC.

He said PIMCO is outperforming 77 percent of the bond market universe even as Treasuries rally "because we hold other bonds that are doing better than Treasuries."

The company's website in May showed PIMCO's $240 billion Total Return fund was short U.S. government-related debt -- which includes Treasuries, TIPS, agencies, interest rate swaps, Treasury futures and options, and FDIC-guaranteed corporate securities.

Asked by Reuters about which of those assets PIMCO was shorting rather than Treasuries, a spokesperson said the firm does not break down that information.

PIMCO started betting against U.S. government-related debt in April, with a short position equivalent to 3 percent of the assets in its Total Return fund.

The fund increased that short position to 4 percent this month as the Federal Reserve's bond purchase program neared its scheduled end in June, raising worries as to who will support the government bond market after that.