MarketView for May 6

Summary

The S&P 500 closed at another record high as financial shares led the way after Bank of America's settlement with MBIA. Apple's advance helped lift both the S&P and the Nasdaq. During the session, the S&P 500 also reached an all-time intraday high of 1,619.77.

Bank of America said it would settle claims with MBIA for $1.6 billion, lifting shares of both companies as well as the S&P financial sector Index .SPSY, which gained 1 percent. MBIA shares jumped 45.4 percent to $14.29 and Bank of America shares rose 5.2 percent to $12.88.

Apple was among the day’s top performers after Barclays raised its price target on the stock. Apple ended the day up 2.4 percent to close at $460.71, leading both the Nasdaq composite index and the benchmark S&P 500 higher.

The day's gains followed a strong run in stocks since the start of the year. Supportive monetary policies that have kept interest rates low as well as solid earnings have helped to keep the market up. The S&P 500 has gained 13.4 percent since December 31.

Although weak economic data from the euro zone and China has caused concerns over the global growth outlook, Friday's stronger-than-expected payrolls report fueled the gains that drove both the Dow and the S&P 500 to record levels.

Warren Buffett said on Monday that low interest rates have made bonds "terrible" investments, but stocks are "reasonably priced," and he continues to shy away from sectors such as media, where he cannot predict which will thrive in the long run.

Earnings have been mostly higher than expected, with 68.5 percent of companies surpassing estimates so far. At the same time, second-quarter estimates have fallen as outlooks remain more negative than positive.

Among Monday's reports, Tyson Foods posted a weaker-than-expected quarterly profit and cut its full-year sales forecast. Its shares ended the day down 3.3 percent to close at $24.10. In contrast, Humana rose 2.1 percent to $75.49 as one of the S&P 500's largest percentage gainers. JPMorgan upgraded the stock to "overweight." However, Johnson & Johnson was down 1.3 percent, closing at $84.68.

GM's also fell. The Treasury Department indicated that it plans to begin another round of sales of General Motors stock acquired during the government's bailout of the auto sector. GM shares slipped 0.9 percent to $31.82.

Approximately 5.3 billion shares changed hands on the three major exchanges, a number that was below the average daily closing volume of about 6.4 billion shares this year.

Buffett Says Bonds Terrible Investment

Warren Buffett said the economy is gradually improving, but low interest rates have made bonds "terrible investments" while stocks remain "reasonably priced." Speaking on CNBC television on Monday, Buffett said the economy is benefiting from an upturn in areas that had not previously performed well, particularly homebuilding.

He also said the rebound is helping create increased traffic for Berkshire's NetJets and could result in a record profit this year for Berkshire's railroad unit Burlington Northern Santa Fe.

"The economy is moving forward, but at a slow pace," he said. "Demand has come back, but slowly."

The world's fourth-richest person said low benchmark interest rates, including overnight rates that Federal Reserve Chairman Ben Bernanke has kept at effectively zero since late 2008, can help stimulate demand. However, many investors have also been drawn to bonds because their prices rise as rates fall, and Buffett said they could get their comeuppance when that process reverses.

"Bonds, they're terrible investments now," Buffett said. "That will change at some point, and when it changes, people could lose a lot of money if they're in long-term bonds."

He said stocks, in contrast, are "reasonably priced," though he continues to shy away from sectors such as media, where he cannot reasonably predict who will thrive in the long run.

"It's a lot easier for me to predict that ketchup will be doing well or Coca-Cola will be doing well in 10 years," Buffett said, referring to Berkshire's pending takeover with Brazilian investment firm 3G Capital of H.J. Heinz, and Berkshire's large investment in Coca-Cola.

Berkshire ended March with $95.9 billion of equities and $31.4 billion of fixed-income securities on its balance sheet.

At the annual meeting, Buffett and Berkshire Vice Chairman Charlie Munger agreed that the economic stimulus provided by Washington during the 2008 financial crisis was needed to address what Buffett called "the greatest panic in my lifetime."

Speaking on Monday, Buffett called Bernanke "a gutsy guy" who has "done very, very well in terms of what he has done for the United States."

Buffett also said Jamie Dimon should remain chairman and chief executive of JPMorgan Chase after ISS Proxy Advisory Services urged that the roles be split and that three directors not be re-elected because of poor oversight. Dimon and the bank have been faulted for a lack of oversight that last year led to more than $6 billion of trading losses. Buffett personally invests in JPMorgan but Berkshire does not.

"I think it's fine if he does" retain both roles, Buffett said, referring to Dimon. "If you're the director of a company like JPMorgan, you cannot know the details of what's going on with trading ... They've got the right CEO."

Berkshire does plan after Buffett leaves to split the roles, with his son Howard becoming non-executive chairman. Buffett said splitting or not splitting the roles are both acceptable.

Buffett also said it will be "very tough" for J.C. Penney to lure back many of the customers it lost in 2012 and early 2013 as the now-ousted Chief Executive Ron Johnson overhauled the retailer's stores and sales strategies.

"They obviously alienated a significant part of their customer base," Buffett said. While Berkshire does not invest in J.C. Penney, Buffett said he had a "rooting interest for them."