Thursday’s Market Recap: Energy Stocks Rally On Bullish Oil Forecast

The markets rebounded from yesterday’s lag in a rally led by financials and energy, as the Dow Jones (^DJI: 8750.24 +74.96 +0.86%) was up 0.86% to close at 8750.24.  The NASDAQ (^IXIC: 1850.02 +24.10 +1.32%) was up 1.32%, closing at 1850.02, while the S&P 500 (^GSPC: 942.46 +10.70 +1.15%) closed at 942.46, up 1.15% for the day.  The 10-year yield rose 3.076% as prices for the treasury fell.  Crude and gold both were up today settling at $68.81 and $982.30 respectively.

Energy stocks were the main reason for a gain in the markets as Exxon (XOM: 72.98 +0.90 +1.25%), Chevron (CVX: 69.79 0.00 0.00%), and ConocoPhillips (COP: 45.97 0.00 0.00%) all saw significant run ups today.  One of the main reasons for the rally in energy was that an analyst from Goldman Sachs made a forecast that energy shortages are likely to return, driving futures to a seven month high.  The same analyst from Goldman is forecasting that oil will reach $85 a barrel by the end of 2009 and $95 a barrel by the end of 2010, as more and more people purchase oil when the economy begins to recover.  Currently, there are no clear economic drivers behind the bullish forecast by the analyst from Goldman, as the most recent data has shown that US inventories are still at high levels and that gasoline demand by consumers is not strong.  Also, information about the summer travel season is not looking that positive, as there was weak demand over Memorial Day weekend (a usually strong weekend for gasoline sales).

Thomson Reuters reported that May sales were worse than expected, as sales fell 4.8% in stores open at least a year as opposed to the predicted 4.1% expected decline.  In May, 63% of retailers missed projections and only 33% beat estimates as retailers suffered due to consumer spending being restrained by the poor economic conditions and no rebate checks.  Wholesale giants Costco (COST: 47.87 -0.60 -1.24%) and Target (TGT: 40.95 0.00 0.00%) saw May same-store sales fall 7% and 6.1% respectively, both failing to meet the estimated 6.4% and 4.3% declines.  The wholesale giants have also been affected like all other retailer as the consumer has cut back significantly as they are worried about their economic sustainability.  Wal-Mart did not release May sales after saying that April was their last month they did however announce that they creating 22,000 new jobs.

In technology news: Intel (INTC: 16.13 +0.19 +1.19%) announced it will enter into the wireless device market by acquiring Wind River Systems (WIND: 11.76 +3.76 +47.00%) for $884 million.  Wind River’s board of directors unanimously approved the offer of $11.50 per share, a 44% premium.  The acquisition will allow Intel to expand beyond its traditional realm of PCs and servers and into the growing area of mobile devices.  This acquisition is an interesting move for Intel, as they move away from semiconductors it will be interesting to see if they can bring their market dominance with them.  The acquisition is expected to close this summer.