Market Recap: Consumer Confidence Carries Dow to a Triple-Digit Gain

              

Following the long holiday weekend, investors returned to the Street in selling mode, with most stocks turning lower right out of the gate. The bearish early birds were further encouraged by escalating tension with North Korea, as well as the latest S&P/Case-Shiller U.S. National Home Price Index, which revealed that home prices fell by 19.1% in the first quarter – the most in 21 years. However, the equities market reversed course within the first hour of trading, thanks to an encouraging consumer confidence report. According to the Conference Board, an index of U.S. consumer confidence rose by more than expected in May, registering its biggest month-over-month surge in more than six years. Against this backdrop, the major market indices kicked off the week firmly entrenched in the black.

The Dow Jones Industrial Average (DJIA – 8,473.49) pared early losses, maintaining a firm foothold in triple-digit-gain territory for most of the session. Only two of the blue-chip barometer's 30 components bucked the trend: Bank of America (BAC) and The Coca-Cola Company (KO). Pacing the advancing issues were American Express (AXP) and JPMorgan Chase (JPM), with even General Motors (GM) rebounding at midday. By the closing bell, the Dow ended with a gain of 196.2 points, or 2.4%, and reclaimed the support of its 20-day moving average.

The S&P 500 Index (SPX – 910.33) advanced 23.3 points, or 2.6%, clawing its way back atop the psychologically significant 900 level for the first time since May 20. Echoing that trend, the Nasdaq Composite (COMP – 1,750.43) added 58.4 points, or 3.5%, with help from a strong performance from tech titan Apple Inc. (AAPL). The COMP is now poised to close the month atop its 10-month trendline for the first time since December 2007.

Turning to equities in focus, Qwest Communications (Q) was the target of a bearish brokerage note ahead of the bell ... General Electric (GE) CEO Jeff Immelt warned that "growth will be harder to come by" in the coming years ... Speculators clamored for calls on both Advance Auto Parts (AAP) and Chesapeake Energy Corp. (CHK) ... Andrea Kramer discussed how bullish bettors can lay down the Tums by utilizing protective puts ... and today's Quote of the Day comes from William L. Federspiel, sheriff of Saginaw County, Mich. In order to generate income for the region, city and county agencies will soon begin selling items on eBay – including a shoulder-mounted elk and a stuffed wolf seized at a recent drug raid. The sheriff said he may use the funds to start a K-9 unit, but wasn't sure how much money the online auction will gross, stating:

"It's hard to gauge the value of a stuffed wolf."

But these weren't the only headlines hitting the Street today. Click on the links below for our Daily Option Blog coverage of:

• F5 Networks, Inc. (FFIV)
• Marathon Oil (MRO)
• Canadian Solar Inc. (CSIQ)
• and American Express (AXP)

And, in case you missed it, Andrea Kramer analyzed how options are priced using the Black Scholes formula. Click here to watch the video.

For today's activity in crude oil, gold futures, options, and more, turn to page 2.

Crude futures inched lower early in the session, thanks to escalating expectations that the Organization of Petroleum Exporting Countries (OPEC) will leave production quotas the same at their meeting Thursday in Vienna. Saudi Arabian Oil Minister Ali al-Naimi today repeated recent comments that OPEC would "stay the course," and said he anticipates stronger demand in the latter half of 2009. However, oil futures reversed course in late-morning trading, as strong consumer confidence data revived hopes for a broad economic recovery. Against this backdrop, July-dated crude finished with a gain of 78 cents, or 1.3%, at $62.45 per barrel.

Meanwhile, the encouraging economic data reduced gold's appeal as a safe-haven investment, sending the malleable metal lower for the first time in five sessions. Also weighing on gold was the dollar, which garnered strength against its foreign rivals in the wake of North Korea's testing of nuclear missiles. By the closing bell, gold for June delivery shed $5.60, or 0.6%, to end at $953.30 an ounce. Earlier in the session, the front-month contract tagged an intraday nadir of $936.60 an ounce.

Levels to Watch in Trading:

Dow Jones Industrial Average (DJIA – 8,473.49) - support at 6,500; resistance at 9,000

S&P 500 Index (SPX – 910.33) - support at 675; resistance at 950

Nasdaq Composite (COMP – 1,750.43) - support at 1,300; resistance at 1,800

At the end of every market day, the staff at Schaeffer's Investment Research reviews the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report. If you enjoyed today's edition of Market Recap, sign up here for free daily delivery straight to your inbox.