Stocks Trade Slightly Higher; Energy Gains
Stocks traded slightly higher after fluctuating throughout the morning following Standard & Poor's downgraded Greece, reigniting worries about the health of the euro zone.
The Dow Jones Industrial Average rose more than five points after a better-than-expected April jobs report helped stocks bounce back on Friday after four days of losses.
McDonald's led Dow components higher after news the fast-food chain's same-store sales at established restaurants rose 6 percent in April.
TheS&P 500 and the Nasdaq rose modestly. Among key S&P 500 sectors, energy and materials gained, while financials fell.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to nearly 18.
Goldman Sachs and Morgan Stanley lowered their forecasts for U.S economic growth this year. Goldman, which dropped its forecast to 3-to-3.5 percent GDP growth from 3.5-to-4 percent, cited signs of slowing momentum in economic growth, rising gasoline prices, and fiscal tightening for cutting its forecast.
Morgan Stanley cut its forecast to a 3.3 percent gain in 2011, down from its April forecast for a 3.6 percent gain, saying its original forecast accounted for the payroll tax cut granted late last year, and that since, rising gasoline prices from about $3 a gallon to $4 a gallon, have wiped out any positive gains from the tax cut.
While the economy has showed signs of weakness lately, a surprisingly strong jobs report from the government last week shows it does continue to expand, albeit unevenly.
"I think if oil prices stay below $100, that should lead to some relief to consumers at the gas pump, and that along with continued job growth, will probably be enough to sustain the economic recovery, said Michael Sheldon, chief market strategist at RDM Financial Group.
"We're cautiously optimistic, and we think the economy and financial markets will continue to grind higher throughout the year, however, we could be in for a short-term trading range or pullback in the market as we head to the summertime," Sheldon said.
Oil prices rebounded on Monday, gaining more than 3 percent. U.S. light crude rose above $100 a barrel, while Brent cruderose to above $113.
Prices of precious metals also rebounded, with silver futures up more than 4 percent, and gold up only slightly, as the dollar traded flat to slightly higher against a basket of currencies.
On the M&A front, Hertz Global Holdings gained after news the car rental company was making another attempt to buy Dollar Thrifty for $2.1 billion. Avis Budget was having difficulty getting regulatory clearance for a rival bid. Last week, Dollar Thrifty solidly beat earnings results and raised its profit outlook.
Citigroup, the third-largest U.S. bank by assets, slumped after it began trading Monday at around $45 a share after a 1-for-10 reverse split. Citi shares traded at about $4.52 Friday, Reuters reported.
Meanwhile, shares of American International Group sank to the lowest level in nearly eight months as the government prepares to sell more shares of the bailed-out insurer to the public, Reuters said. At current levels, the government may not break-even on the sale, as the U.S. Treasury would need to make as much as $28.72 a share.
And Tyson Foods sank despite delivering fiscal second-quarter revenue results that beat expectations. The meat producer also forecast better-than-expected sales results for the year.
PepsiCo gained after Goldman Sachs added the food and beverage company to its "conviction buy" list. The move comes not long after Credit Suisse raised PepsiCo to "outperform" from "neutral," and lifted its price target to $85 a share from $69.
In initial public offering news, LinkedIn, the social networking site for business professionals, plans to sell abut 4.8 million shares for $32 to $35, raising up to $274.4 million.
Consumer debt held steady at $11.5 trillion in the first quarter after nine consecutive quarters, the New York Federal Reserve reported Monday. The figure is down $1 trillion from the peak in 2008.
Obama Administration officials meet Chinese officials in Washington on Monday and Tuesday for the third meeting of the U.S.-China Strategic and Economic Dialogue.
European stocks traded lower lower in morning trade amid renewed concerns over the European debt crisis.
Top euro zone officials discussed the need for new adjustments to the Greek aid program, and Irish officials added to concerns by saying any concessions given to Greece should also result in better terms for Ireland, Reuters reported.
Standard & Poor's cut its rating on Greece to "single-B/single-C" from "double-B-minus/single-B." The rating agency cited "rising rescheduling risk" for the move, and maintained its "negative" CreditWatch outook.
On the Calendar This Week:
MONDAY: Employment trends index, Intel announcement, Citi reverse stock split takes effect; earnings from Activision Blizzard after-the-bell.
TUESDAY: NFIB small business index, import and export prices, wholesale trade, Richmond Fed president speaks, 3-year Treasury note auction; Google developers conference, CIT Group shareholder meeting; earnings from Dean Foods before-the-bell, and Disney after-the-bell.
WEDNESDAY: Weekly mortgage applications, international trade, oil inventories, Atlanta Fed president speaks, 10-year Treasury note auction, Cleveland Fed president speaks, Minneapolis Fed president speaks, Treasury budget, AIG IPO roadshow, Comcast shareholder meeting, Senate judiciary hearing on AT&T merger; earnings from Arcelor Mittal and Toyota before-the-bell, and Cisco and Symantec after-the-bell.
THURSDAY: PPI, retail sales, jobless claims, business inventories, 30-year Treasury bond auction, money supply, NPD video game sales, Ford shareholder meeting, options industry conference; earnings from Kohl's and Macy's before-the-bell, and Nordstrom after-the-bell.
FRIDAY: CPI, consumer sentiment, Transocean shareholder meeting; Earnings from Petrobras
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