MarketView for May 14

Summary

Stocks rallied to new highs on Tuesday partially due to increased demand for large-cap companies' shares on the expectation that central bank stimulus will help propel the rally further. Gains were across the board, but growth sectors outperformed their peers with bank stocks leading the way.

Bank of America ended the day up 2.8 percent to close at $13.34, and was the Dow's largest percentage gainer, while Citigroup ended the day up 2.4 percent to close at $50.09.

Wall Street has rallied without a significant correction since the start of the year, pushing major indexes to all-time records and sending the S&P 500 up almost 16 percent for 2013 so far. The ascent has been driven in large part by the Fed's easy monetary policy, designed to stimulate the economy, though investors' focus has turned to when the Fed may start to rein in its bond-purchase program.

To date declines in the market have been met with buying and investors are trying to gauge how long that can last. During today’s trading session, the Dow Jones Industrial Average hit an all-time intraday high of 15,219.55, while the S&P 500 climbed to an all-time intraday high of 1,651.10. The Nasdaq touched a fresh 52-week high of 3,468.67.

The market traded sideways for the past three sessions, showing a gain of just 0.07 percent as the winding down of the quarterly earnings season and a light economic calendar have left investors without a strong catalyst for further gains. The Dow's gains were limited by weakness in Intel, down one percent at $23.84, and UnitedHealth Group, off 1.1 percent at $61.73.

Sony ended the day up 9.9 percent to close at $20.76 after billionaire hedge fund investor Daniel Loeb called on the company to spin off its lucrative entertainment arm.

Nokia unveiled a new version of its Lumia smartphone line, but shares still fell 5.2 percent to end the day at $3.64. Gartner said Nokia lost 5 percentage points of market share in the first quarter, falling to 14.8 percent.

Solar power companies' shares fell after Trina Solar estimated lower panel shipments than a previous outlook and said its results would be hurt by a foreign currency exchange loss. The stock fell 8.8 percent to close at $5.41.

Most corporate earnings have been better than expected this quarter. With 90 percent of the S&P 500 companies having reported results so far, 67.2 percent have topped earnings expectations, according to Thomson Reuters data, which is even with the average over the past four quarters. However, only 46.9 percent have beaten revenue expectations, below the 52 percent average over the past four quarters.

Approximately 6.2 billion shares changed hands on the three major equity exchanges, just below the average daily closing volume of 6.4 billion shares this year.

Import Prices Drop

Import prices fell in April due to a decline in the price of oil, a positive sign for the consumer and the drop was a precursor to benign inflation pressures. According to a report released by the Labor Department Tuesday morning, import prices fell 0.5 percent last month, making it the largest decline since December. Meanwhile, March's data was revised to show a 0.2 percent decline instead of the previously reported 0.5 percent drop. In the 12 months to April, import prices fell 2.6 percent. Stripping out petroleum, import prices dipped 0.1 percent.

The tame inflation environment should allow the Federal Reserve to stay on its ultra-easy monetary policy course as it tries to nurse the economy back to health. At its policy meeting earlier this month the central bank decided to continue buying $85 billion worth of bonds every month to push long-term interest rates downward.

At the same time, the economy has lately shown signs of resilience despite austerity measures enacted this year by Washington.

The National Federation of Independent Business said on Tuesday its gauge of confidence for small U.S. businesses rose in April to its highest in six months.

Lower oil prices are also helping household finances. We import much of the fuel we consume. Last month, imported petroleum prices fell 1.9 percent. The Labor Department report also indicated that export prices fell 0.7 percent last month, the largest decline since June.