Stocks advanced Monday as an uptick in leading indicators offered investors a modest confirmation of the optimism they've been trading on.
Leading indicators rose 0.1 percent for a second straight monthin April following five months of decline, according to the Conference Board.
"The news today is actually good," Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, said of the leading-indicators report. "It confirms what financial markets have been saying since the middle of March ... that the economy and earnings will recover in the second half."
"It's not a strong signal," Johnson said. "Not an overwhelming signal. Not a convincing signal -- but it's better than nothing."
Crude oil was trading around $126-$127 a barrel, after closing Friday at a record $126.29 a barrel.
High oil prices fueled concerns about the weary consumer and there was fresh chatter that the credit crunch isn't yet over.
"It looks to me like the consumer is trying to stay alive but there are some signs of exhaustion starting to build up," Art Cashin, director of floor operations for UBS, told CNBC. "The next three to six months, I think the market tries to punch through the upper end of the range," he said, but added, "I think they probably don't make it." Cashin said he thinks the Federal Reserve might even cut rates again, instead of preparing to begin raising them, as many expect.
Warren Buffett is off searching for bargains in Europe but had a poignant comment about the U.S. during a news conference.
"[T]he effects of the credit crunch are far from over," Buffett said. "I think there will be rippling secondary, tertiary effects ... It is really more an effect of the residential real-estate bubble which led to the credit crunch in some degree," he said.
European Central Bank President Jean-Claude Trichet echoed that sentiment, saying the end of the credit crunch isn't yet in sight and the correction is still ongoing, and it is significant.
In Monday's market action:
Home-improvement retailers skidded after Lowe's beat earnings expectations but issued a cautious outlook for the rest of the year.
Rival Home Depot skidded ahead of its earnings report, due out Tuesday.
Hewlett-Packard again advanced after taking a beating early last week over its proposed acquistion of IT-services firm EDS .
General Motors gained amid hopes that a three-month strike at parts maker American Axle may soon be over. The UAW is putting to a vote a contract that would cut wages by nearly 40 percentand close three plants, while offering buyouts of up to $140,000.
The Microsoft-Yahoo saga took another turn as Microsoftproposed an alternative deal to Yahoo involving an online-advertising alliance in lieu of a full-on acquisition. Though, Microsoft wants to reserve the right to change its mind on that at any time.
Microsoft was the biggest drag on the Dow.
Financials were mixed after Citigroup analysts again slashed their outlooks for Wall Street investment firms including Goldman Sachs , Lehman Brothersand Morgan Stanley .
Transportation stocks jumped more than 2 percent.
Semiconductors rose after Goldman Sachs upgraded its rating on the sector to "attractive" from "neutral." The Philadelphia Stock Exchange semiconductor index gained more than 1 percent.
Shares of Amazon jumped after Goldman Sachs raised its price target on the stock and added it to its "Americas conviction buy" list.
Oracle shares rose after a Barron's report suggested the stock was poised to resume a long-term ascent and that it may be considering an acquistion.
Walt Disney shares were among the top Dow decliners after "The Chronicles of Narnia: Prince Caspian" was No. 1 at the weekend box office but fell short of expectations. The film's estimated three-day sales came in at $56.6 million; analysts had expected $80 million, or at least better than the first movie's $65.6-million debut.
Meanwhile, Doug Kass, who famously shorted "everything related to housing" in 2007, told Barron's he has a short position in Warren Buffett's Berkshire Hathaway, largely because the company has suffered from a drift in its investment style.
TUESDAY: PPI; Fed's Kohn speaks; Earnings from Home Depot, Medtronic, Staples, Target and HP; Kentucky, Oregon primaries
WEDNESDAY: MBA mortgage applications; crude inventories; Fed's Warsh speaks; Fed minutes; Earnings from BJ's Wholesale
THURSDAY: Jobless claims; Fed's Kroszner speaks; Earnings from Gap; Libertarians choose presidential candidate
FRIDAY: Existing-home sales; Bond market closes early for Memorial Day holiday
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