Wall Street ends flat as energy gains offset poor sentiment

May 17, 2008 | By Raymond Tan In Millionaire Thoughts |

Another ho hum day….

US stocks ended flat on the last day of the trading week as surging oil prices lifted energy shares to offset data showing poor consumer confidence rankings, the worst in 28 years.

Exxon Mobil Corp and Chevron Corp rose more than 1 per cent each, supporting the Dow and S&P 500. Oil prices in New York closed at a record high above US$126 on a weakening dollar and a Goldman Sachs forecast that crude would reach US$141 per barrel.

Earlier, US oil futures hit an intraday record near US$128.

The lofty level of oil prices helped drive down other sectors, however. An S&P index of retail shares was down 1.1 per cent.

US consumer confidence tumbled this month, according to the Reuters/University of Michigan Surveys of Consumers, as short-term inflation expectations hit their highest since the stagflation era of the early 1980s.

The consumer accounts for ‘around two-thirds to 75 per cent of the US economy. So I think when you look at energy prices and housing prices weakening in key areas, these are all aspects keeping the consumer weak, and sentiment numbers are reflecting that,’ said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

For the week, stocks rose, however, and the S&P had its best weekly percentage gain in about a month, with data showing a modest rise in consumer prices in April contributing to the week’s upbeat news.

The Dow Jones industrial average slipped 5.86 points, or 0.05 per cent, to end at 12,986.80.

For the week, the Dow was up 1.9 per cent, the S&P was up 2.7 per cent and the Nasdaq was up 3.4 per cent.

Trading volume continued to be on the light on the New York Stock Exchange (NYSE), with about 1.32 billion shares changing hands, below last year’s estimated daily average of roughly 1.90 billion. NYSE trading volume hit its low for the year on Monday, when 1.05 billion shares traded hands.

Financial shares sagged after Merrill Lynch downgraded two large regional US banks, KeyCorp and Regions Financial Corp, citing a bleak outlook for such banks. An S&P index of financial shares fell 1.4 per cent.

June crude rose US$2.17 to settle at US$126.29 per barrel and hit an intraday record of US$127.82.

Chevron Corp gained 1.9 per cent to US$100.38 and Exxon Mobil rose 1.5 per cent to US$92.67.

A surprising increase in US housing starts gave the market some reason for optimism early in the session.

Housing starts rose by a surprisingly strong 8.2 per cent in April and building permit applications turned up for the first time in five months, the Commerce Department said. But all of the increase was due to a huge rebound in the multifamily sector, which had a sharp decline in March. The single-family sector actually declined.

Stronger-than-expected earnings from retailers Nordstrom, up 3.1 per cent at US$38.44, and Abercrombie & Fitch, up 0.1 per cent at US$76.19, also helped.

On the Nasdaq, about 2.29 billion shares traded, above last year’s daily average of 2.17 billion.

So is it still a case to consider selling and going away in May? I don’t think so.

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