(Source: Business Week)
U.S. stocks started May on a positive note, closing higher Friday as a late flurry of buying catapulted the market out of an earlier mixed performance. Indexes had been churning within a narrow range after having posted solid gains in April, and as investors mulled over mixed reports focusing on manufacturing, consumer sentiment and factory orders.
Higher oil prices buoyed energy issues. Other economically sensitive sectors like industrials also rose.
Many markets around the world were closed for the May Day holiday.
On Friday, the 30-stock Dow Jones industrial average finished higher by 44.29 points, or 0.54%, at 8,212.41. The broader S&P 500 index gained 4.71 points, or 0.54%, to 877.52. The tech-heavy Nasdaq composite index added 1.90 points, or 0.11%, to 1,719.20. On the New York Stock Exchange, 19 stocks were higher in price for every 11 that declined. Breadth on the Nasdaq was 14-13 positive. Trading was slow.
Treasury prices were lower, with yields rising. The U.S. dollar index was lower. Gold futures were off.
Despite an improving tone in the economic outlook and ongoing signs of thaw in the credit markets, there's no lack of potential pitfalls on the immediate horizon, according to Action Economics, including stress test results and the health of the banking sector, key data on the economy, and ongoing updates on the swine flu. "All of these factors will be front and center [next] week, challenging the hefty April gains on Wall Street," says Action Economics.
The Labor Dept.'s employment report for April, scheduled for release on May 8, is also likely to keep traders jumpy. Economists expect a decline of 635,000 jobs, less than the 685,000 monthly average during the first quarter. They also look for the unemployment rate to jump another 0.3 percentage points to 8.8%.
Traders Friday were eying the latest developments in the government's stress tests of major U.S. banks. The Federal Reserve will release results on Thursday afternoon, May 7, according to news reports. The results were initially planned for Monday, but apparently there has been an ongoing debate over the conclusions of the tests and how best to disseminate them to the markets, such that a Monday release became infeasible.
The announcement will include potential capital needs for each of the 19 bank holding companies that underwent the "what if" scenarios, along with an aggregate total, according to an unidentified government official. Regulators have reiterated the tests are not a "pass/fail" and aren't meant to be taken as solvency measures but rather are designed to ensure banks have a solid capital base.
