Stock Market News for May 11, 2009

With U.S. employers cutting fewer jobs in April and banks’ stress test results throwing up less-than-expected surprises, U.S. stocks advanced helping S&P 500 erase this year’s losses and tech-heavy Nasdaq recorded its ninth straight weekly gain.  Reassuring signs emerging from the employment front indicated the economy is starting to find its footing as even a $75 billion deficit in capital failed to deter investors.  Stock buyers helped broad-based S&P 500 end the week 5.9% higher – the index is up 37% from a 12-year low hit on March 9. During the week, the Dow Jones Industrial Average added 362.24 points, or 4.4%, to 8,574.65. The Chicago Board Options Exchange Volatility Index, a measure of market volatility, declined 9.2% to 32.05. Volume on the NYSE was a heavy 1.9 billion as advancing issues outpacing declining stocks by a five-to-one margin.
 
Among S&P sector groupings, financials were the leading gainers on the week with a 23% surge. Bank of America (NYSE:BAC - Analyst Report), which is among the ten banks needing capital infusion, rose 63% during the week.  Citigroup (NYSE:C - Analyst Report) which needs to raise $5.5 billion, gained 35% to $4.02.  The bank plans to convert $5.5 billion of preferred stock into common shares to plug the capital hole.  Responding quickly to the government’s mandate were Well Fargo (NYSE:WFC - Analyst Report) and Morgan Stanley (NYSE:MS - Analyst Report), which raised a total of $11 billion in heavily oversubscribed deals.  Morgan Stanley added 9.2% to $28.20.  Wells Fargo (NYSE:WFC - Analyst Report), hailed by Warren Buffett as “fabulous,” climbed 44% to $28.18. The bank, in which Buffett’s Berkshire Hathaway Inc. is the leading shareholder, needs $13.7 billion. Fifth Third Bancorp (NASDAQ:FITB - Analyst Report) jumped almost 60% on Friday after the government’s stress test results showed Ohio’s largest bank needs to raise less capital than some analysts were expecting.

Goldman Sachs Group Inc. (NYSE:GS - Analyst Report), which passed the government’s stress test, said it plans to soon repay the $10 billion of bailout money. Nevertheless, banking analyst Meredith Whitney warned, "the recessionary environment is very difficult," due to problems looming with credit cards and mortgage originations.

Oil and gas shares rose 8.7% and basic materials were up 6.5% as investors began to bet on the early stages of improved spending by businesses.

Exxon Mobil Corp. (NYSE:XOM - Analyst Report) and Schlumberger Ltd. (NYSE:SLB - Analyst Report) led energy companies in the S&P 500 to an 8.5% advance. Exxon added 4.1% to $70.80 and Schlumberger gained 12% to $56.53.  El Paso Corp. (NYSE:EP - Analyst Report) was the leading gainer in the group, rising 27% to $9.03, after the company reported better-than-expected profit on expanding lines and hedging correctly on energy prices.  General Motor (NYSE:GM) led the declining issues on the DJIA after reporting a huge first-quarter loss that pushed it closer towards bankruptcy.  McDonald’s Corp. (NYSE:MCD - Analyst Report) reported another month of impressive comparable sales with April recording a 6.9% jump in same-store sales.

A U.S. Labor Department report Friday said non-farm payrolls declined 539,000 in April, beating economists’ projections for a decline of 600,000. Figures for March were revised to show a steeper decline of 699,000.  Unemployment rate rose to 8.9% from 8.5% in March.    

Fed Chairman Bernanke speaks tonight on the stress tests. On Wednesday, April retail sales are due for release, and are expected to have declined 0.1% following March's 0.2% drop. Although economists doubt the ongoing strength of the consumer, Friedman Billings, Ramsey on Friday lifted the price targets on several retailers including Abercrombie and Fitch (NYSE:ANF - Analyst Report), Ann Taylor (NYSE:ANN - Snapshot Report), and Pacific Sunwear (NASDAQ:PSUN - Snapshot Report). On Friday consumer price numbers are expected to show annual headline numbers at their lowest since January 1955, off 0.6%, with core CPI up 1.8% on an annualized basis. Among key companies slated to release earnings are JC Penney (NYSE:JCP - Analyst Report), Macy's (NYSE:M - Analyst Report), Nordstrom (NYSE:JWN - Analyst Report) and Wal-Mart (NYSE:WMT - Snapshot Report).

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