MarketView for May 12

Summary

It was an interesting day on Wall Street on Monday with both the Dow Jones Industrial Average and the S&P 500 indexes closing out the day at record highs, while the Nasdaq rallied as shares of Internet and biotech shares advanced. The Dow chalked up a record closing high and an intraday record high of 16,704.

Biogen Idec was up 4.8 percent to $300.54 and TripAdvisor Inc gained 5.8 percent to close at $89.51. Twitter was up 5.9 percent to $33.94 after news reports that SunTrust raised its rating on the stock to a "buy."

These momentum shares have been wildly volatile in recent sessions after a sharp selloff that began in March on concerns about their high valuations.

The Russell 2000 index of small-cap stocks climbed 2.4 percent, its largest daily percentage gain since early March. At its session low Friday, the index was down exactly 10 percent from the intraday record high set in early March. A correction, which is a drop of 10 percent from a recent high, is often seen as a harbinger of more weakness.

The rally came despite a vote by pro-Russian rebels in favor of self-rule in eastern regions of the country in a referendum dismissed by Kiev and Western governments as illegal. The European Union is set to step up pressure on Russia by taking steps to extend sanctions to companies, as well as individuals.

Hillshire Brands announced that it had agreed to acquire Pinnacle Foods in a deal valued at about $6.6 billion, including debt. Pinnacle ended the day up 13.2 percent to close at $34.47, while Hillshire fell 3.2 percent to end the day at $35.76.

U.S.-listed shares of Indian companies and India-related exchange-traded funds also rose as exit polls in India predicted that the country's main opposition party - viewed as more business friendly - would win general elections.

In the latest development on deals in the healthcare sector, shares of Allergan fell one percent to $159.72 after the company, known for Botox, its popular anti-wrinkle treatment, rejected Valeant Pharmaceuticals takeover offer of $47 billion. Valeant's U.S.-listed shares slipped 0.8 percent to $130.16.

Tesaro was up 21 percent to $29.05 after the company said its experimental drug to prevent chemotherapy-induced nausea and vomiting met the main goal in a third late-stage trial.

Approximately 5.7 billion shares changed hands on the major equity exchanges, a number that was below the 6.2 billion share average for the month to date, according to data from BATS Global Markets.

Government Posts Reduced Deficit for April

The United States posted a $107 billion budget surplus in April, according to Treasury Department figures released on Monday, suggesting the federal government was on track to slash its annual deficit. Washington usually runs a surplus in April because households have a deadline for settling tax bills that month.

Tax receipts have are up sharply this year as the economy has improved. The Congressional Budget Office expects the deficit will shrink to $492 billion during the fiscal year, which began in October. In 2013, the government ran a $680 billion deficit.

So far this year, the government has run $306 billion into the red. That deficit is 37 percent smaller than it was in the same period of fiscal 2013. Last month's receipts were $8 billion higher than they were in April of last year. Outlays were also higher, though they have been on a downward trend in part because an improved labor market has led fewer people to draw on jobless benefits. The expiration of benefits for many long-term unemployed workers in January has also reduced outlays.