Lower crude price makes sends cheer at US Market

A strengthening dollar pushes crude down by more than three dollars

A major drop in crude prices helped US market end modestly higher today, Tuesday, 27 May, 2008. Crude prices dropped by more than $3 today. Other than that there was a mixed bag of economic data in the market. Eight out of ten sectors ended the session in positive territory, led by technology sector. Energy was one of the two losers.

Among major economic news of the day, the Commerce Department reported today that sales of new homes climbed in April for first time in six months. But market anticipates that the gain was a rebound from a sharp drop the prior month and doesn't mark a turning point for the embattled housing market.

The Dow Jones industrial Average ended the day with a gain of 68.7 points at 12,548. The Nasdaq Composite Index, finished higher by 36.3 points at 2,481. S&P 500 finished higher by 9.4 points at 1,385.3.

Twenty out of thirty Dow stocks ended in the green today. Citigroup and IBM were the main Dow winners for the day. The decliners were led by General Motors, Chevron and Exxon Mobil.

Elsewhere, the Conference Board reported that U.S. consumer confidence extended its tumble in May to reach a 16-year-low, as inflation expectations reached a record on rising gas prices. The Consumer Confidence Index fell to 57.2 for May, which is less than the reading of 60 that was widely expected, and down from the prior month's 62.8.

Separately, San Francisco Fed President Yellen stated today that the Fed's rate policy and the fiscal stimulus will lift the economy, while total and core inflation will moderate in the next couple of years. Yellen also stated the financial markets are still far from normal.

Crude-oil futures fell after the dollar strengthened and also as traders took in profits. Crude-oil futures for light sweet crude for July delivery today closed at $128.85/barrel (lower by $3.34/barrel or 2.5%) on the New York Mercantile Exchange.

At the currency markets on Tuesday, the dollar extended gains against major rivals building on gains from weak German consumer confidence data earlier. The dollar index, which tracks the greenback against a basket of six major currencies, was up 0.3% to 72.213.

Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

On the New York Stock Exchange, volume topped 1.1 billion, with advancing stocks edging ahead of those declining by almost 2 to 1. On the Nasdaq, nearly 760 million shares were exchanged, and advancers topped decliners, also by 2 to 1.

For tomorrow, the April durable orders report is the sole item on the economic calendar. The durable orders release measures the dollar volume of orders, shipments, and unfilled orders of durable goods (defined as goods whose intended lifespan is three years or more). Other than that, there are a few earning reports on the dock.