Stock Market News for May 19, 2011

Markets benefited once again from commodities on Wednesday, as a rebound in that sector not only lifted the broader markets but dragged the indices out of the negative territory. Meanwhile, Fed minutes and a positive earnings report from bellwether Dell added to the cheer.

The Dow Jones Industrial Average (DJIA) gained 0.6% and settled at 12,560.18. The Standard & Poor 500 (S&P 500) was up 0.9% to close at 1,340.68. The Nasdaq Composite Index inched up 1.1% to end the day at 2,815.00. On the New York Stock Exchange, AMEX and Nasdaq, consolidated volumes were 6.5 billion shares, well below the average volumes of 8.4 billion shares last year. For every four stocks that gained on the NYSE, one stock was on the declining side.

Commodities have been fluctuating for a considerable period now and are making the markets volatile. Once again, it was a swing in the commodities that moved the markets, though this time they took an upward path. Gold futures for June delivery and silver futures for June delivery both surged 0.9% and 4.8% to settle at $1493.70 an ounce and $35.08 an ounce, respectively. Meanwhile, the energy sector derived strength from higher crude prices which increased to over $100 a barrel, as did the broader markets.

On the New York Mercantile Exchange, crude oil for June delivery surged 3.3% to settle at $100.10 per barrel. This jump comes after the Energy Department reported supplies unexpectedly declined by 15,000 barrels for the week ending May 13, 2011 to 370.3 million. Overall petroleum inventories were left unchanged but total petroleum inventories were down 0.1 million barrels and the total petroleum surplus compared with five-year average was down by roughly 2 million barrels.

The energy sector benefitted from these gains as the Energy Select Sector SPDR fund increased 2.0%. Among the key stocks, shares like Chevron Corp. (NYSE:CVX - Analyst Report), Exxon Mobil Corporation (NYSE:XOM - Analyst Report), ConocoPhillips (NYSE:COP - Analyst Report), Transocean Ltd. (NYSE:RIG - Analyst Report), Halliburton Company (NYSE:HAL - Analyst Report), Schlumberger Limited (NYSE:SLB - Analyst Report), Valero Energy Corp. (NYSE:VLO - Analyst Report), Western Refining Inc. (NYSE:WNR - Analyst Report) and Chesapeake Energy Corporation (NYSE:CHK - Analyst Report) gained 2.4%, 1.7%, 1.8%, 1.4%, 3.6%, 2.1%, 2.6%, 6.8% and 3.0%, respectively.

The material sector shared the gains and was up 2.1% in the S&P 500. CF Industries Holdings, Inc. (NYSE:CF - Analyst Report) led the gains as it jumped 4.4% to settle at $140.19 per share. Among other shares, Agrium Inc. (NYSE:AGU - Analyst Report), Potash Corp. of Saskatchewan, Inc. (NYSE:POT - Analyst Report), Caterpillar Inc. (NYSE:CAT - Analyst Report), Alcoa, Inc. (NYSE:AA - Analyst Report) and United States Steel Corp. (NYSE:X - Analyst Report) increased 2.1%, 2.4%, 3.1%, 1.5% and 1.5%, respectively.

The Federal Reserve released the Fed minutes, which suggested that officials believe the economy is trending up. Much of the talk centered around the quantitative easing program the Fed had implemented last year through its $600 billion-bond purchase plan. Since the declaration of the economic stimulus, stocks have risen almost 25% and with interest rates being kept low, commodities have also enjoyed an uptrend. In the last meeting, a few officials were concerned about continuing the program through June, but the minutes stated: "A few members remained uncertain about the benefits of the asset purchase program but, with the program nearly completed, judged that making changes to the program at this time was not appropriate". 

However, some officials opined that tightening monetary policy is one of the next steps forward and some central bank officials referred to raising the interest rates to fight against inflation. This statement dragged bond prices lower. Many officials also think the hike in interest rates is a better option than the sale of assets when the time arrives. The Fed report stated: "A majority of participants preferred that sales of agency securities come after the first increase in the (Fed's) target for short-term interest rates," and added, "And many of those participants also expressed a preference that the sales proceed relatively gradually, returning (Fed holdings) to all Treasury securities over perhaps five years". Commenting about the sale of assets, a chief strategist from Prudential Financial in Newark said: "The longer the economic data remain weak and the longer the unemployment numbers stay high, there seems to be a growing chorus of analysts who think that the Fed will be forced to use their balance sheet to keep buying".

On the earnings front, Dell Inc. (NASDAQ:DELL - Analyst Report) snatched the limelight after reporting a strong jump in income and profit margins. The software major also topped expectations and raised its guidance for the next quarter. The company’s shares surged 5.4% and settled at $16.75. Joining the favorable results from the technology sector was Autodesk, Inc. (NASDAQ:ADSK - Analyst Report) and its shares climbed 1.8%.

Read the full analyst report on CVX

Read the full analyst report on XOM

Read the full analyst report on COP

Read the full analyst report on RIG

Read the full analyst report on HAL

Read the full analyst report on SLB

Read the full analyst report on VLO

Read the full analyst report on WNR

Read the full analyst report on CHK

Read the full analyst report on CF

Read the full analyst report on AGU

Read the full analyst report on POT

Read the full analyst report on CAT

Read the full analyst report on AA

Read the full analyst report on X

Read the full analyst report on DELL