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Dow Closes Above 13000 as Oil Recedes

Sell in May then go away?

Not today.

Stocks kicked off May with a rally Thursday as investors shifted money into growth cyclicals such as financials and techs after another better-than-expected economic report.

The Dow industrials gained 1.5 percent, closing above 13000 for the first time since early January. The S&P 500 index also revisited January levels, as a 1.87-percent gain propelled the index above 1400. The Nasdaq made the strongest advance, soaring 2.8 percent, helped by gains in techs.

The Dow is now about 2 percent away from where it started the year. The S&P is off 4.2 percent for the year and the Nasdaq is down 7 percent.

"We're seeing a major shift out of commodities into financials, consumer-discretionary and techs," said Steve Neimeth, portfolio manager at AIG SunAmerica. The market is also seeing "many investors targeting underperforming groups year-to-date, which will benefit from an economic recovery."

"The dollar got stronger, so people started to rotate out of commodities. Where are they going to go? They want to buy stocks," said Dave Rovelli, managing director of equity trading at Canaccord Adams. "And tech earnings were a lot better than people expected."

Among 10 key S&P sector indexes, financials jumped 3.4 percent, consumer discretionary increased 3.1 percent, IT climbed 2.8 percent and telecom rose 2.5 percent.

The biggest gainers on the Dow were: American Express , which shot up 7 percent; Bank of America, which gained 4.7 percent; and Intel and Citigroup , which tied for third with increases of 4.5 percent each.

The Dow had opened the day lower as a rise in jobless claims rattled a few cages ahead of tomorrow's jobs report and ExxonMobil's $10.9 billion quarterly profit was -- wait for it -- a disappointment.

Exxon Mobil fell 3.6 percent, making it the biggest drag on the Dow. The oil giant reported its net income rose 17 percentto $10.9 billion, or $2.03 per share, up from $9.3 billion, or $1.62 per share, a year ago. But analysts had expected that, given record oil prices, the company would surpass its own record of an $11.7 billion profit earned in the fourth quarter of 2007. The culprit, it seems, was margins at the company's refining operations. Record prices of refined products such as gasoline, while a menace to consumers, failed to keep pace with the rapid increase in crude prices.

Crude oilsettled at $111.82 a barrel, while gold fell to a multi-month low around $850 a troy ounce as the dollar neared its highest levels since February.

After a better-than-expected GDP report on Thursday, the Institute for Supply Management followed up with a solid reading on U.S. manufacturing activity.

The ISM said its manufacturing index held steady at 48.6in April, though it remained below 50, which indicates contraction. Prices paid increased.

Separate economic reports showed initial jobless claims rose by 35,000, more than expected, last week, though the four-week moving average declined. Personal spending in March rose 0.4 percent, twice as much as expected, and income climbed 0.3 percent; the Fed's favorite inflation gauge ticked up 0.2 percent. Construction spending dropped 1.1 percent.

Looking ahead to tomorrow's jobs report, economists and analysts expect the reading to be dim but not earth-shattering to the market.

"I think it will be a pretty weak one," said David Bianco, strategist at UBS Investment Research. "But the market is really getting past the worst of employment fears."

Shares of Adobe Systems rose 4.6 percent after the maker of Photoshop and Flash software maker said it expects quarterly revenue to come at the high end of its expected range and backed its projection of 13 percent revenue growthfor the full year ahead of its annual meeting later today.

Among other notable gainers in tech land were Intel, Google, Apple, Yahoo and Research In Motion.

Chip-equipment stocks were among tech's top gainers after Bianco upgraded UBS's rating on the sector to "overweight," citing global demand, notably from China and India, which have become two of the biggest handset markets in the world. Other strategists said chip equipment was doing well because in the front seat of the forward-looking animal that is the market and the market is increasingly expecting a recovery in the second half of 2009.

Meanwhile, Microsoft's board met, but failed to come to a consensus about what to do concerning its bid for Yahoo. The software giant could make a hostile bid, sweeten its offer or just walk away altogether, the Wall Street Journal reported.

Home Depot gained 3.9 percent after the home-improvement retailer announced plans to close 15 underperforming U.S. storesand put a lid on opening future stores for a while. Home Depot said it expects a charge of about $586 million related to this move. Even excluding this charge, Home Depot expects a 24-percent drop in earnings for the year.

Retail stocks also benefited from the money shift, with the S&P retail index finishing up 3 percent. Macy's rose 4 percent.

Airline stocks continued to benefit from consolidation speculation. Among today's big winners were AMR's American , which shot up 13 percent, United parent UAL, which gained 8.1 percent and Continental , which added 7.1 percent. For the week, the five airlines at the center of most of the merger speculation are up anywhere from 11 percent (Continental) to 31 percent (Northwest).

U.S. auto makers reported dismal April sales, hit hard by gasoline prices. General Motors said its sales fell nearly 23 percent from a year earlier and its inventory narrowed by about 200,00 vehicles amid a strike at a key supplier. Ford's U.S. sales skidded 19 percent.

Starbucks said after the bell Wednesday that it would likely earn less this yearthan the year before.

Burger King Holdings, the second largest fast-food chain, posted a gain in quarterly profit that amounted to 30 cents per share, ahead of the analysts estimate of 27 cents a share.

Shares of Pioneer Southwest Energy Partners, a spinoff of Pioneer Natural Resources that buys oil and gas properties in Texas and southwest New Mexico, rose 3.4 percent in their debut on the Big Board. The stock priced at $19 after the closing bell yesterday. (Is the IPO Market Simmering Again?)

Marvel Entertainment rose 3 percent as the summer blockbuster season kicks off this weekend with Marvel's "Iron Man,"starring Robert Downey Jr. as a wealthy weapons executive who invents a powerful high-tech suit of armor to battle the bad guys.

Still to Come:

FRIDAY: April jobs report; factory orders; earnings from Chevron, Viacom

Send comments to cindy.perman@nbcuni.com.