Stocks Advance on Hopes for Economic Rebound

Even though the economy remains weak, investors on Thursday were already looking ahead to a recovery and setting their sights on inflation.

Prices of energy, metals and other commodities rose Thursday and helped lift stock markets higher.

Crude oil prices rose to their highest point in seven months, gold flirted with $1,000 an ounce, and interest rates on government bonds increased sharply.

Investors seeking signs of economic stability were also encouraged by reports on Thursday showing reductions in first-time unemployment claims and continuing jobless claims for last week.

The numbers underscored hopes that the worst declines in the labor market were ebbing as investors prepared for the monthly unemployment report on Friday.

As investors see more signs that the global recession is beginning to flatten, they are moving money into stock markets and riskier corporate bonds, and away from safer investments, including longer-term Treasury notes.

Investors are growing concerned that the government's huge spending projects could lead to a round of inflation once the economy begins to recover, driving commodity prices higher and pulling Treasury prices even lower. Some analysts worry such a move could stifle consumer spending and throw the economy into deeper trouble.

"All the actions the Treasury has taken to drag us out of the muck are going to come back to bite us," said James D. King, president of National Penn Investors Trust.

On Thursday, crude oil futures for July rose $2.69 to $68.81 a barrel after Goldman Sachs said that oil prices could surge to $85 a barrel by the end of the year. Just a few months ago, some oil analysts were predicting that oil could sink to $20 a barrel as the economy stayed mired in recession.

John Kilduff, senior vice president of energy at MF Global, said he was seeing a new species in the markets to complement the so-called bond vigilantes who drove up bond yields decades ago in protest of the government's monetary and fiscal policies. Enter the commodity vigilantes, he said.

"There's a new crew of commodity market vigilantes out there as well, buying up hard assets in anticipation of how beaten up the dollar could get as a result of these moves by the Fed and Treasury," Mr. Kilduff said. "There's a real concern out there."

The prices of copper, wheat, sugar, silver and platinum also rose on Thursday, and gold rose to $980 an ounce. Even though those commodities and others have rebounded sharply this spring, analysts said that global demand for raw materials has remained depressed, and they did not expect a speedy recovery would revive industrial output soon.

"It's unnerving," Mr. Kilduff said. "You have a hard time squaring the fundamental picture of supply and demand with these price rises."

The Dow Jones industrial average gained 74.96 points, or 0.9 percent, to close at 8,750.24 while the broader Standard & Poor's 500-stock index rose 10.7 points, or 1.2 percent, to 942.46. The Nasdaq was 1.3 percent higher, closing at 1,850.02.

Financial stocks led the way higher after analysts upgraded several banks, encouraging investors to put their money back into a section of the market that fell the hardest as the financial crisis took hold. Goldman Sachs rose 5.2 percent to $149.47 after an analyst upgraded its stock. Bank of America and Citigroup each gained more than 5 percent.

Retailers were mixed after another anemic month of sales in May, and energy producers like Exxon Mobil and Chevron rose on higher oil prices.

But investors shunned longer-term Treasury notes for another day, pushing the price of the benchmark 10-year note down 1 12/32 to 95 5/32. The yield rose to 3.71 percent, from 3.54 percent late Wednesday.

The rising yields on Treasuries are rippling through to mortgage markets. On Thursday, Freddie Mac said the rate on a 30-year fixed mortgage rose to an average 5.29 percent this week, from 4.9 percent. The Federal Reserve is buying billions in securities to contain borrowing costs, but analysts said the steady rise in rates suggested that bond investors were undoing those efforts.

"It would be a detriment to early recovery if rates do trend higher," said Art Hogan, chief market analyst at Jefferies & Company.

10 Stocks for 2010: Buy-and-Hold Picks From Top Investors

DAY traders and momentum investors probably won't be interested in this article.

Because what we're talking about here is looooong-term investing. The people in Atlanta who for years and years have owned shares in a certain local company that makes soda pop will understand. So will those who a few decades ago entrusted some money to a brainy guy in Omaha. So, too, will that brainy guy himself, Warren E. Buffett.

What we've done is to ask 10 very smart, very successful investment professionals to pick one stock each -- a stock that barring an act of God or some unforeseeable geopolitical disaster they would feel comfortable buying now and holding until Jan. 1, 2010.

The stocks they selected are an eclectic lot. None of the managers mentioned many of the best performers of the 1990's -- not Microsoft, not Qualcomm, not EMC. On the other hand, more than a few participants picked stocks they have already owned for 10 years -- fairly remarkable for people whose livelihoods depend in whole or in part on how their stock picks do over the short term.

This article is not an attempt to identify the stocks that will do the best in the next 10 years.

As an article on Page 9 explains, the lists of the best-performing stocks of past decades are peppered with names of companies that flared and then flailed, companies that only the most prescient, lead-bellied investor would have bought at the start of the decade.

In the fullness of time, a few of the stocks that our financial professionals have selected may wind up on the best-dressed list of the 00's. Most probably will not.

Given the track records of the participants, however, when the time comes to look back, the odds are that the bulk of these companies will have qualified as good long-term investments.

See you in 2010.

John W. Ballen

MFS Emerging Growth Fund

Pick: Oracle

John Ballen doesn't mind holding stocks for a decade. His top pick for the next decade is a stock that has been in his portfolio since 1990.

''Oracle is a stock we have owned for 10 years, so it would be a 20-year hold,'' he said.

Mr. Ballen, who manages the $19 billion MFS Emerging Growth fund, has fairly basic criteria for buying and holding a stock. ''You want a company with a dominant market position, a company a number of other companies are betting their future on,'' he said. ''You want a company with great cash flow and a stable balance sheet in a high growth market. And you want management that can execute.''

Which brings us back to Oracle, a company that Mr. Ballen says is ''morphing into the software company of the Internet.''

''They are already emerging as the software company on the Internet,'' he said, noting Oracle's success in providing databases, applications and business-to-business transaction sites. ''And that is going to be a place you want to be for the next 10 years.''

Oracle is scarcely a secret to most investors. The stock is selling at about 125 times next year's earnings. But the lofty valuation shouldn't be a problem, said Mr. Ballen, whose fund had an annualized rate of return of 24.9 percent during the 1990's.

''By traditional measures, the stock is not cheap,'' he acknowledged. ''But if you are looking at a 10-year hold, the current valuation parameters won't matter. If their earnings can grow significantly, the multiple will be far less'' in 2010.

Laszlo Birinyi

Deutsche Bank

Pick: Nokia

For a stock to stay in his portfolio for 10 years, said Mr. Birinyi, a bullish global trading strategist, it must represent a stake in a company that thinks, well, globally.

A company's ''outlook on the world is important,'' he said. ''Managements change. But you want to find companies who may not yet be part of the global village, but who will be. That means identifying companies with products based on concepts that can travel.''

In his view, Nokia, the Finnish maker of cellular phones, fits the bill.

''They have stayed well ahead of the curve in telecommunications and cell phones,'' said Mr. Birinyi, whose predictions of the stock market's trajectory were consistently among the most bullish for much of the 1990's and proved much closer to the mark than most of his peers'.

''These people have the ability to come out with new products,'' he said of Nokia. ''In Europe, cell phones are almost as ubiquitous as car keys. As the third world develops, that is going to be a huge market.

The big rise in Nokia's stock price during the last 10 years -- its total return was more than 3,600 percent -- doesn't bother Mr. Birinyi much.

''The stock probably won't do better than it did in the 1990's, but it will continue to rise,'' he said.

Mr. Birinyi said shares of companies that have done well ''have a tendency to continue to do well, especially if they are being innovative and inventing new products.''

George A. Mairs 3rd

Mairs & Power Growth Fund

Pick: Medtronic

The notion of sticking with a stock for a decade isn't foreign to Mr. Mairs. His $477 million Mairs & Power Growth Fund isn't an active buyer and seller of stocks. According to data from Morningstar, the fund's average annual turnover rate during the 1990's was just 2 percent. But the returns have been solid: an annual average of 18.3 percent for the decade that just ended.

''We are looking for companies with durable franchises, ones that have been around for at least 10 years,'' Mr. Mairs said. ''We are also looking for companies that have a leading market share. If we find companies that qualify on that basis, we are comfortable holding stocks for years, even decades.''

His top pick for the next decade is Medtronic, which also happens to be the fund's second-largest holding.

''It is the leading implantable medical device company in the world today, and has been for 25 years,'' Mr. Mairs explained. ''They have an exceedingly strong franchise -- one that is so strong that they have added to their product line by buying other companies.''

Roger McNamee

Integral Capital Partners

Pick: Flextronics International

It may seem counterintuitive, but venture capitalists are often buy-and-hold investors.

''Cisco has been part of our portfolio since just after it went public in 1990,'' said Mr. McNamee, whose firm makes venture capital and public investments in technology companies.

''We have owned Microsoft and Intel for much of the last decade, and Oracle for most of that time,'' he said. ''Their common characteristic is that they were all positioned in front of very large business opportunities.''

Indeed, making sure a company is well positioned in a growing industry -- ''getting the fundamentals right,'' as Mr. McNamee puts it -- is probably the most valuable thing an investor can do when committing money to a stock for a decade or more.

And then, he said, ''you have to leave it to the market.''

Mr. McNamee is comfortable with the fundamentals at Flextronics International, another long-term Integral holding that is his top pick as a keeper for the 00's.

''They are Manufacturing Inc. for the technology world,'' he said of Flextronics, which is based in Singapore. ''They are a contract manufacturer with the most efficient supply train in the industry. When you go to Cisco's Web site to order a router, it goes to Flextronics. They have an exceptional management team and a wonderful reputation of having totally changed the rules. They are the Dell Computer of this decade.''

Flextronics, which went public in 1994, had a total return of more than 1,100 percent during the 1990's. Still, for an Internet-related company, the stock is trading at a comparatively modest 53 times this year's earnings.

Bill Nasgovitz

Heartland Value Fund

Pick: Henry Schein Inc.

Mr. Nasgovitz, the president and founder of Heartland Advisors and manager of its $1.1 billion Heartland Value fund, likes ferreting out small, cheap stocks. With so many stocks under attack, he has a big sampling of names to sift through these days.

''We love to bargain hunt,'' Mr. Nasgovitz said. ''That is what we are all about.''

His record of buying low and selling higher is not too shabby: Over the last 10 years, Heartland Value has posted an average annual return of 16.4 percent, Morningstar said.

Mr. Nasgovitz accepted the assignment of choosing one stock to hold until 2010 with a degree of reluctance.

''Ten years is an awfully long time in this competitive market, in this competitive world,'' he said. (At Heartland Value, the turnover rate was a very low 4 percent a year during the 1990's, according to Morningstar.)

Undaunted, he framed the issue by considering the needs of the world's graying baby boomers. His buy-and-hold selection is Henry Schein Inc., a global distributor of dental and health care supplies whose stock he has been buying lately.

''We need more and more dental care, not only in the U.S. but worldwide,'' Mr. Nasgovitz explained. Yet the stock, which traded for $53 in mid-1998, is now selling at about $13. ''It hasn't participated in this rally at all,'' he said.

Mr. Nasgovitz figures that catering to the aging teeth in mouths all over the world should increase Henry Schein's revenues by 15 percent a year through the decade.

The company currently has annual sales of more than $2 billion. ''In 10 years, that means their top-line revenues should quadruple,'' he said.

Bill Miller

Legg Mason Value Trust Fund

Pick: Waste Management

Mr. Miller is not the stranger to technology that many value managers are. America Online has long been one of the fund's biggest holdings, helping Mr. Miller become that most sought-after rarity: a fund manager whose $12.5 billion portfolio regularly beats the market indexes.

Nonetheless, when asked to pick a stock to buy and hold for the next decade, he chooses a business that is about as basic as they get.

''Waste Management is a company with extremely low valuations that is surrounded with a lot of pessimism,'' he said. ''But it has a good business model and no Internet, currency or technological risk. And it has only three major competitors. We think this is a stock where you can make 5 times to 10 times your money in the next 10 years.''

The fact that few competitors are out fighting Waste Management to haul garbage is an important consideration when making a long-term investment, Mr. Miller said. ''You want a business that is relatively insulated from competition, where the barriers to success are high,'' he said. ''It is very difficult to build a dominant waste management company.''

The company has a long way to go to regain respect on Wall Street. After issuing profit warnings every month from July through October, Waste Management named a new chief executive last November.

''You have to look in places where valuations are low and at businesses that have the possibility of earning high returns,'' Mr. Miller said.

Liz Ann Sonders

Campbell, Cowperthwait

Pick: JDS Uniphase

Maybe it's because she just had her second child, a girl. But Ms. Sonders does not quarrel with the notion that buying and holding a stock for 10 years is a little like parenting.

''It won't all be great, and you have to be nurturing,'' she said.

Ms. Sonders is a managing director and a member of the investment policy committee at Campbell, Cowperthwait, a money management firm in New York that is a division of the United States Trust Company. The firm, which manages $4.5 billion, mostly for high-net-worth individuals, has an impressive track record; its gains last year exceeded 55 percent.

Much of the appreciation is a result of big investments in technology stocks, which now make up nearly 60 percent of the firm's model portfolio.

''To me, it is fairly easy to suggest that technology will be the area that will be the big winner'' over the next decade, she said. ''In general, it is where you want to look for opportunities.''

It is also the space that JDS Uniphase, Ms. Sonders' top buy-and-hold pick, occupies. The company, which makes fiber optic products for telecommunications and cable television companies worldwide, is one of the market's darlings, returning 984 percent over the last year.

''It is the marriage of a great company and great management with great industry fundamentals,'' Ms. Sonders said. ''At a minimum, the fiber optic component market is expected to quadruple in size over the next three years. The only hindrance is that there is too much demand.''

Of the companies that compete in this market, JDS Uniphase ''has the broadest product line,'' Ms. Sonders said. ''They are the dominant player in terms of scale and size, and their earnings will grow at a 50 percent annual rate over the next three to five years,'' she said.

Justin Thomson

T. Rowe Price International

Discovery Fund

Pick: Zee Telefilms

The notion of parking a stock in a portfolio for a decade is not one that sits easily with Mr. Thomson, whose $1.1 billion fund rose a hefty 155 percent last year.

For one thing, most of the companies in which the fund invests are small. More often than not, they get swallowed. Some get wiped out. Few stay in his portfolio for an extended period.

''I am not Warren Buffett, so this is quite a high-risk strategy for me,'' Mr. Thomson said by telephone from London. ''It's like running naked.''

Still, the criteria for selecting a company worth holding for a decade are pretty clear, he said.

''It should be in an area where the overall market is growing, because it increases your chances of success,'' he said. ''And companies in growing markets tend to have pricing power.''

Zee Telefilms, an Indian film and television company, is the stock Mr. Thomson said he would buy and hold until 2010, despite his squeamishness.

''Over a decade, this is one of the best ways to play India as a consumer force,'' he said. ''They will be the major beneficiary of advertising spent in that market, and they are well positioned in all sorts of areas, including the Internet.''

A conglomerate that owns free and subscriber channels as well as a cable operation and an entertainment division, Zee was an extraordinary performer last year, posting a gain of more than 1,800 percent.

Currently, Zee Telefilms does not trade in this country. Only 30 percent of its outstanding shares are available to foreigners. Because of various securities laws, the only way to obtain them is through a mutual fund like Mr. Thomson's.

''They don't have an American depository receipt yet, but I would not rule that out,'' Mr. Thomson said.

Robert E. Turner

Turner Investment Partners

Pick: Cisco Systems

Mr. Turner, whose firm manages money for institutions and mutual fund investors, isn't a traditional buy-and-hold kind of money manager.

''We buy companies where earnings will exceed expectations and sell them where earnings are going to miss expectations,'' said Mr. Turner, chairman and chief investment officer of Turner Investment, based in Berwyn, Pa. ''We tend to buy and own stocks that are making new highs versus new lows. But we also pride ourselves on fundamental analysis.'' His Turner Equity Growth fund, founded late in 1993, posted an average annual return of 23.7 percent in the 90's.

About 40 percent of the $6 billion that the firm has under management is in technology stocks. And Cisco Systems is at the top of his list for the new decade.

Cisco's stock was a strong performer of the 1990's. Mr. Turner knows that a second decade of gains that are remotely akin to those would be astounding, and unlikely.

''Over the next 10 years they many not have the highest appreciation, but in terms of pure risk/reward, Cisco is the stock I feel most comfortable with,'' he said. ''They understand where the marketplace is going and are making sure they are going to be a leader.''

Since 1993, Cisco has made 50 acquisitions in areas relevant to its business, Mr. Turner noted.

''That shows to me they are paying attention to where the market is going,'' he said.

(His other favorite? Internet Capital Group, the holding company that manages and operates a stable of Net companies.)

Ralph Wanger

Acorn Fund

Pick: Jones Apparel Group

Mr. Wanger buys and holds stocks. His $4 billion Acorn Fund has low annual turnover -- about 30 percent. The stocks he selects have not done badly, either. Over the last decade, the fund had an annual average rate of return of more than 17 percent, versus 14.93 percent for the Lipper small-cap funds index.

He is a man of few words but clear ideas about the kind of stock he would want to hold for 10 years: ''Stocks with a terrific brand name in an industry that was likely to be popular for a very long time.''

To make the cut, ''growth is obviously important, and so is management,'' he said. ''Some technology companies have higher growth rates than the stocks I like, but the idea those growth rates will persist for 10 years is unlikely.''

Similarly, ''if you are looking to hold a stock for 10 years, you have to assume that many of the people that are in current management won't be there in 10 years,'' he added. ''You can't bet on a genius unless the genius is young.''

With those things in mind, Mr. Wanger said his top long-term choice is Jones Apparel Group of Bristol, Pa.

''It's a well-run company,'' he said. Plus, ''I think women will be wearing clothing 10 years from now, and Jones Apparel will be making their fair share of those clothes.''

A report showing that Berkshire Hathaway owned slightly more than 12 million Jones New York shares at the end of last year didn't bother Mr. Wanger a bit. Nor do questions that have circulated recently about the company's management tenure.

''Mr. Buffett understands value, and there is value and growth in a company like Jones,'' he said.

Mr. Wanger said he was not aware of any serious matters relating to Jones Apparel management. But he would not be overly concerned if he had heard them, he said.

''Management changes will happen over the next 10 years, no matter what the company is,'' he said.

Many Hot Names of the Past Have Vanished

PAST performance is no guarantee of future success'' just might be one of the most useful phrases ever uttered on Wall Street. For confirmation, one need only peruse these lists of the best-performing stocks of the past four decades.

(Before leaping from your chair in indignation about the names included or excluded, a word about methodology: only companies that were public for the entire 10 years of each decade qualified, so Internet stocks didn't. And stocks trading at $5 or less at the beginning of the decade were ruled out.)

For starters, consider how many of these companies no longer exist as stand-alone businesses. Burroughs and Dr Pepper, two hot stocks of the 1960's, were swallowed. Parker Pen was too -- only now Gillette, the current owner, is exploring ways to unload the flagging business. And during the 1990's the roar of the Dreyfus lion was muffled in the maw of the Mellon Financial Corporation.

Or think about the fate of NVF, the best performing stock of the 1970's. In the ensuing decade and junk bonds, NVF was controlled by Victor Posner, one of the biggest junk bond aficionados of the 1980's.

Things didn't work out so well for Mr. Posner, or for his plastics products company. In May 1986, the New York Stock Exchange suspended trading in NVF shares. Ultimately, Mr. Posner was barred from heading a public company.

But there are positive stories here, too, about brands with lasting value. Tandy and the Gap are still going strong. Scientific Atlanta, one of the best performers of the 1970's, is seen by many as a key player, with its cable modems.

Perhaps the most striking numbers in these charts are the gains of the best performers of the 1990's.

The gains posted by NBTY, a maker of nutritional supplements -- a bit over 7,800 percent -- were more than three times those recorded by Delta Air Lines and NVF in topping the charts for the 1960's and 1970's, respectively. But NBTY barely made the top 10 for the 1990's.

The distinction between the 1990's and the previous 30 years would have been even sharper if the criteria had been relaxed a bit.

Cisco Systems and JDS Uniphase, two stocks recommended as holds for the 00's, went public after Dec. 31, 1989. Cisco, which missed the deadline by a couple of months, rose 69,000 percent in the 1990's; JDS Uniphase shares have appreciated more than 31,000 percent since their public offering in November 1993. KENNETH N. GILPIN

Photos

Charts: These lists of the best-performing stocks of the last four decades hint at both the dangers and opportunities in investing for the long term. Highflying stocks can crash, and the best investments can appear out of nowhere. (Source: Center for Research in Security Prices, University of Chicago Graduate School of Business)(pg. 9)

Graph: ''Long-Term Management''

Best stocks:US retailers report May sales declines

Although consumer confidence may be increasing, it's not showing up at the cash register yet. Many retailers posted disappointing May sales on Thursday, and food and necessities remained high on shoppers' lists.

Symbol	Price	Change
ARO	36.70	+0.09
BKE	34.52	-1.57
COST	47.87	-0.60
HOT	24.98	+0.39
PLCE	31.50	-2.98

{"s" : "aro,bke,cost,hot,plce","k" : "c10,l10,p20,t10","o" : "","j" : ""}

According a Goldman Sachs/ICSC tally, overall same-store sales fell 4.6 percent, worse than the 3 percent drop predicted.

The lower-than-expected results did not include Wal-Mart stores, which in recent months has boosted total results but has stopped reporting monthly figures.

April's same-store sales figures included Wal-Mart and edged up. But excluding the world's largest retailer, May was the 10th straight month of same-store sales declines, according to a tally by Goldman Sachs and the International Council of Shopping Centers.

The results come amid faint signs that the gloom of recession is lifting. On Thursday, the Labor Department said the number of Americans on the unemployment rolls fell slightly for the first time in 20 weeks, while the tally of new jobless claims also dipped.

In May, the Conference Board's Consumer Confidence Index rose to its highest level since September. And several retailers including BJ's and TJX Cos. indicated traffic improved in May.

But that generally did not translate to sales, as job worries and falling home prices are still clearly weighing on consumers as they shop.

Results are a "clear indication that the consumer is not stampeding back to the stores, they're still being very careful," said BMO Capital Markets analyst John Morris. "I think the initial panic is over, but now the tough work begins. We're entering a slow summer period when there's not a lot to attract consumers into the stores."

Luxury chains and department-store operators continued to be the weakest sectors, with Saks Inc. and Neiman Marcus reporting double-digit declines. Discounters such as Ross Stores Inc. and teen apparel retailers such as The Buckle Inc. were stronger. Cheap chic discounter Target reported a bigger drop than analysts expected, as apparel and home products continued to be weak sellers.

Overall, necessities like food and health care products continued to be the strongest sellers.

"There's general softness across the board, as consumers continue to face rising unemployment, falling home values and rising gas prices," said Ken Perkins, president of retail consulting firm Retail Metrics LLC.

Gas prices rose 30 cents per gallon in May, with the national average for a gallon of unleaded ending the month at $2.36. Still, prices aren't expected to get near last year's high of about $4 a gallon.

Wal-Mart Stores Inc.'s absence makes conclusions about the broader economy more difficult, said Perkins, because it accounts for 10 percent of retail spending. "Wal-Mart has been lifting everybody for the last year and half," Perkins said.

Wal-Mart said monthly reports had too much volatility caused by calendar shifts and would now report same-store sales quarterly.

Also weighing on results was last year's $50 billion fiscal stimulus, which shoppers received in May last year and retailers credited for a lift in sales.

Elsewhere, "the trends we've seen through the first quarter are continuing," said Stifel Nicolaus analyst Richard Jaffe. "The consumer has voted with their pocketbook, they want better value and higher quality at better prices."

Same-store sales, or sales at stores open at least a year, are a key indicator of retailer performance because they measure growth at existing stores rather than newly opened ones. Economists closely monitor consumer spending because it accounts for about 70 percent of U.S. economic activity.

"Consumers are out shopping, but they're looking for value," said Janet Hoffman, managing partner of the global retail practice of Accenture.

Such bargain-hunting benefited some discounters. Off-price retailers TJX Cos. and Ross Stores both reported a same-store sales rise above expectations.

However, Target same-store sales fell 6.1 percent, a bigger drop than the 4.3 percent analysts expected.

Warehouse club operator Costco Wholesale Corp. and rival BJ's Wholesale Corp. both reported same-store sales drops of 7 percent and 6.8 percent, respectively, mostly due to lower year-over-year gas prices.

At both Target and the warehouse clubs, food products were among the most popular items.

Department-store operator Macy's Inc. said same-store sales slipped 9.1 percent, slightly above the 9.3 percent drop Wall Street expected.

The teen sector continued to be among the best performers, with low-price stores doing the best. The Buckle Inc. and Aeropostale Inc. both reported double-digit increases.

However, Abercrombie & Fitch -- which has kept prices high despite competitors' markdowns -- said same-store sales plummeted 28 percent. Last month, Abercrombie finally bowed to pressure and said it has started to reduce prices.

Analysts generally expect the weak trends to continue throughout the summer. Niemira forecasts a 3 percent to 4 percent drop in June.

Financial, energy stocks pull market higher

NEW YORK (AP) -- Traders are betting that an improving economy will reward banks and energy companies.

Related Quotes

Symbol	Price	Change
ANF	27.95	-3.75
APC	48.57	+1.52
GS	149.47	+7.32
KEY	5.50	+0.90
M	12.88	-0.44

Stocks rose for the fifth time in six days Thursday after analysts raised their ratings on banks and oil prices rose again, making energy firms look increasingly attractive. Investors were also willing to take more chances on stocks after the government reported that the number of workers continuing to receive unemployment benefits unexpectedly fell for the first time in 20 weeks.

The drop in unemployment rolls, as well as in first-time claims for jobless benefits, gave investors another bit of hope that the economy is finding a more stable footing. The idea that the economy is halting its slide has driven a powerful rally that has lifted the Standard & Poor's 500 index 39.8 percent in three months.

The data arrived a day ahead of the government's monthly tally of job losses -- often seen as the most important report on the economic calendar. The unemployment rate stood at a 25-year high of 8.9 percent in April and economists expect it will rise to 9.2 percent when the May report is issued Friday.

Investors are looking for any sign that unemployment is ebbing because that could help shore up consumer spending, retail sales and the housing market.

"Things seem to have stabilized and people are hunting for any sort of information they can get to determine the next move in the market and the economy," said Jim Sinegal, equity analyst at Morningstar in Chicago.

The Dow Jones industrial average rose 74.96, or 0.9 percent, to 8,750.24. The broader Standard & Poor's 500 index rose 10.70, or 1.2 percent, to 942.46, and the Nasdaq composite rose 24.10, or 1.3 percent, to 1,850.02.

The S&P and Nasdaq are at new highs for the year, and both are showing gains for 2009. The Dow is now down only 26 points for the year after having been in the red since early January.

Bond prices fell after the drop in jobless claims. Fewer worries about the economy made the safety of government debt less attractive. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.54 percent. The yield has been fluctuating recently as investors absorbed a mix of economic data.

The gains in financial and energy stocks offset mixed reports from retailers on their May sales.

Banks got a boost after RBC Capital Markets analysts said the worst of the financial crisis is over. The KBW Bank index, which tracks 24 of the nation's largest banks, rose 4.8 percent.

KeyCorp. jumped 90 cents, or 19.6 percent, to $5.50 after an upgrade from RBC, while Goldman Sachs Group Inc. rose $7.32, or 5.2 percent, to $149.47 after a Bernstein Research analyst raised his rating.

The improved data on unemployment and a weak dollar helped push oil prices to fresh highs for the year. Oil and other commodities have been rallying on expectations that an improving economy will lift demand.

Light, sweet crude rose $2.83 to settle at $68.71 a barrel on the New York Mercantile Exchange after climbing as high as $69.56, its highest level since November.

That helped energy companies. Anadarko Petroleum Corp. rose $1.52, or 3.2 percent, to $48.57, while Occidental Petroleum Corp. advanced $1.75, or 2.6 percent, to $68.62.

Retailers including Macy's Inc. and Abercrombie & Fitch Co. lost ground as traders worried that shoppers were still reluctant to spend. A year ago, sales benefited from government stimulus checks. Macy's fell 44 cents, or 3.3 percent, to $12.88, while Abercrombie slid $3.75, or 11.8 percent, to $27.95.

The market's surge this spring since hitting 12-year lows on March 9 has been driven by better-than-expected data. But investors are now looking for clearer indications that the economy is improving.

"If we're on the cusp of a recovery and a convincing recovery, then the stock market makes all the sense in the world," said Michael Darda, an economist with MKM Partners in Greenwich, Conn. "If it turns out there is no recovery until next year, then the market could run into some trouble."

On Wednesday, investors sold stocks following weaker-than-expected reports on factory orders and the services industry.

Scott Jacobson, chief investment strategist at Capstone Sales Advisors in New York, said investors should be careful about expecting that the gains will continue to come.

"It's too late right now to dump all your money into the stock market given where it is," he said.

Investors are likely to remain focused on concerns like unemployment and the dollar. The greenback has fallen steadily since early March as investors' appetite for riskier assets increased. A falling dollar can trigger inflation, hurting consumers' buying power.

In other trading, the Russell 2000 index of smaller companies rose 8.97, or 1.7 percent, to 531.68.

About three stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.1 billion shares compared with 5.2 billion traded Wednesday.

Last week, the 10-year yield surged to a six-month high of 3.75 percent on worries over mounting U.S. government debt loads. Investors are on edge because higher rates on mortgages and other loans could stall an economic recovery.

Overseas, Japan's Nikkei stock average fell 0.8 percent. Germany's DAX index rose 0.2 percent while Britain's FTSE 100 and France's CAC-40 each gained less than 0.1 percent.

June Newsletter

June Update Sign In

Welcome to the early summer installment of CNN Heroes! Do you know a "Young Wonder" - someone 25 or under who is changing people's lives in a big way? Or how about someone who's doing something remarkable to protect the environment? It's not too late to nominate them as a CNN Hero! Click the link below to tell us about them. So far we've received more than 4,500 nominations! But don't delay - nominations close August 1. Our Facebook community is growing! In its first three weeks, more than 1,000 Facebook members have joined the CNN Heroes fan page - and they're getting a first-look at never-before-seen highlights of this year's Heroes. Read on to find out how you can join in our Facebook fun! Also in this month's newsletter: meet three new CNN Heroes, including one whom locals have called "crazy." Find out how she earned her nickname, go behind-the-scenes of a Heroes' shoot in North Carolina, and see which 2008 CNN Hero recently earned a state award for her efforts. Wanna be inspired? Read on! CNN Heroes 2009 Join our Facebook community DO YOU KNOW SOMEONE WHO SHOULD BE A CNN HERO? View 2009 Heroes Suzan Lakhan Baptiste DEFENDING THE PLANET Suzan Lakhan Baptiste's dedication to ending the slaughter of leatherbacks in her community was so fierce, locals called her "Crazy Turtle Woman." see full story Shin Fujiyama YOUNG WONDER As a college student, Shin Fujiyama transformed his days into a life-changing experience - rallying thousands of young people to help fight poverty, one campus at a time. see full story Pam Koner COMMUNITY CRUSADER A photograph in the New York Times moved Pam Koner to tears - and to action. Now, in her fight against hunger, she's redefining what it means to be a good neighbor. see full story HEROES UPDATE: WHERE ARE THEY NOW? Carolyn LeCroy – 2008 CNN Hero In April, the Governor of Virginia, Tim Kaine, presented Carolyn with the 2009 Governor's Volunteer and Service Award in Richmond for her work connecting kids with their incarcerated parents. Her Messages Project is now in 11 Virginia institutions, has successfully expanded to several prisons in Nebraska, and will soon launch in Missouri. watch Carolyn's story Phymean Noun – 2008 CNN Hero Since being honored at CNN Heroes: An All-Star Tribute last November, Phymean received more than 2,000 emails from around the world and $80,000 in donations to continue educating and supporting the children working in Phnom Penh's trash dump. She's expanded the classroom to incorporate some of the children on her waiting list and hopes to build an orphanage next year. watch Phymean's story FROM THE FIELD CNN Heroes producer Danielle Berger shares her experience filming with CNN Hero Doc Hendley as he "turns wine into water" for communities in need worldwide. After a long drive on a windy, rainy mountain road, my cameraman and I arrived in Boone, N.C. to meet Doc Hendley. Doc was visually nervous when we met, but in a relaxed, southern way that matched his snakeskin boots and subtle drawl. During his interview, he explained how his work evolved from burning passion to haunting burden. I was struck by how closely his words resembled those of other heroes: Superman, Batman and Spiderman experienced an initial thrill at their ability to help those in need, but were ultimately weighted with a heaviness of responsibility. After filming an evening Wine to Water fundraiser, guests were serenaded by Doc on guitar and by a spirited display of clogging by his wife and mother-in-law that literally shook the house. About a week after our shoot in the U.S., Doc headed to Cambodia to help bring water to a school community - filmed by a CNN Hong Kong-based crew. The footage was beautiful and I was thrilled that it was exactly what we hoped it would be. It amazed me when Doc explained that nearly 75% of annual Cambodian deaths are caused by water-related illness. Being able to witness his dedication and sweet interaction with the children of the village brought to light everything he had described to me in his interview in Boone. see full story CNN Heroes is on Facebook Join our growing community and invite your friends - and get a first-look at exclusive photo albums and bonus video from our shoots with the 2009 Heroes. Visit Heroes on Facebook JOIN THE CONVERSATION Each week, we invite you to share your reaction to the work our Heroes are doing - and how they inspire you. See what people are saying about one of our recent - and wildly popular - CNN Heroes and contribute your own opinion in the 'Sound Off' section. Make sure you receive our e-mails. Please add CNN@access.cnn.com to your address book. You are receiving this e-mail because you have agreed to receive updates about CNN Heroes. To unsubscribe from this e-mail, click here. CNN.com Privacy Policy One CNN Center Atlanta, GA 30303 © & ® 2009 Cable News Network

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The Top 10 Reasons to Hold Gold, Bar None!

With gold working up the gumption to walk through $1,000 for the third time in this historic climb, Fools are encouraged to step into a broader understanding of the fundamental factors behind the metal's gilded outlook.

Before we dive back in, let's recap the first five reasons to hold gold from part 1:

1. The United States is awash in a sea of trillions.
2. Derivatives are falling from a massively frothy peak.
3. As spending skyrockets, government revenue is set to contract sharply.
4. Quantitative easing is a very slippery slope.
5. The U.S. dollar is set for a sustained decline.

6. Inflation Looms
Of all the reasons to hold gold, the debate over potential scenarios for the onset of inflation remains the most unnecessary obstacle to understanding gold's outlook. We must not let the inflation debate muddy the waters for gold, since frankly, all scenarios are now supportive of gold. Whether you're convinced we'll see runaway hyperinflation, a deflationary spiral, or stagflation, the direction for gold is unaffected.

Washington has shown its cards, Fools. A deflationary spiral clearly was deemed the most unacceptable consequence of this crisis, resulting in an implied guarantee that further economic contraction would be met by ever-increasing sums of stimulus. In this policy environment, therefore, inflationary forces do not hinge upon economic stabilization. While it's true that recovery could exacerbate inflationary forces as liquidity starts circulating through the economy, inflation can certainly take hold without it … and I believe it will. I view looming inflation as a currency event rather than an economic event, and see stagflation as a likely outcome. No matter which scenario unfolds, though, this environment is ripe for gold.

7. A question of confidence
When Treasury Secretary Tim Geithner told a group of students in China on Monday that their country's U.S. dollar holdings are "very safe," the crowd broke into laughter. Holding more than $1 trillion in U.S. debt, China's concerns are justified. In March, Prime Minister Wen Jiabao admitted he too was "concerned about the safety of our assets." In stark terms, a former Chinese central bank advisor warned Monday that "another financial crisis triggered by a dollar crisis could be inevitable" if the U.S. fails to reduce deficits and increase savings. Hou Huimin of the China Gold Association relates the discussion back to gold: "the US dollar … may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."

As revealed in April, China is indeed holding more gold … 1,054 tonnes of it. Precious metals analysts see China's accumulation signaling a "broader shift in central banks' attitude towards gold," potentially "re-igniting gold's relevance as a monetary asset." Meanwhile, China is leading a charge to increase the role of its own currency in international trade, instituting $95 billion in dollar-dodging currency swaps with nations from South Korea to Argentina. A bi-lateral trade deal with Brazil may also seek to skirt the greenback, while up to 50% of China's trade with Hong Kong could be conducted in yuan by 2010. The ascendancy of China's currency on the international stage can be seen as a challenge to the dollar's de facto reserve currency status. In fact, the BRIC countries (Brazil, Russia, India, and China) presented a unified front at the G20 summit in April, proposing a new global reserve currency to replace the dollar, based upon a basket of currencies … including gold. All of these developments stem from diminishing confidence in the U.S. dollar as a product of Nos. 1 through 6 above.

8. Gold remains cheap
Then-Fed Chairman Paul Volcker faced some tough challenges containing inflation in the late 1970s, but in terms of scale, his predicament was undeniably tame compared to the pickle we're in today. And yet, gold remains more than 50% below the inflation-adjusted peak from 1980. Given the fundamental deterioration of the dollar's outlook over the past year, I consider gold primed to establish last year's high above $1,000 as a new long-term floor.

9. Gold is relatively scarce
Unlike paper money, gold cannot be created out of thin air. Despite a 7% rise in overall demand in 2008, including a 27% surge from bullion ETFs like SPDR Gold Shares (NYSE: GLD), global mine production fell 3%. Successive market shocks, from soaring costs to crashing prices, disrupted the global pipeline of mine development projects. Low-cost producers like Goldcorp (NYSE: GG) were driven to quarterly losses, while operational snags plagued South African miners like Gold Fields (NYSE: GFI) and AngloGold Ashanti (NYSE: AU). All told, Randgold Resources (Nasdaq: GOLD) CEO Mark Bristow indicated last December that global gold supply could contract 15% over the next five years as a result of insufficient investment in future supply. Poised for some very timely organic production growth, I continue to view intermediate miners Yamana Gold (NYSE: AUY) and Agnico-Eagle Mines (NYSE: AEM) as substantial long-term investment opportunities.

10. The ultimate safe haven
I have held no punches in my assertion that the ongoing equity rally is fundamentally unsustainable given the deteriorating condition of the domestic economy. During the last market sell-off, investors flocked to U.S. Treasuries in droves as a conventional safe haven. As concerns mount over looming inflation and a damaged dollar, however, I believe that investors will increasingly turn to gold as the ultimate safe haven.

The above 10 reasons to hold gold provide a timely primer on the metal's fundamental outlook. I expect substantial volatility going forward, so I caution against trying to time short-term movements. While I lament the unfortunate circumstances that would take us there, I expect a substantial increase in the price of gold to offer healthy gains and critical protection for the well-positioned investor.

5 Stocks Bucking the Downtrend

Even on the market's worst days, buyout news and other short-term forces can send individual stocks up by 10%, 25%, even 50%.        

For example, shares in Exelixis (Nasdaq: EXEL) were shining bright and jumped more than 18% on Thursday when the company secured a drug development partnership with sanofi-aventis.   

But beyond less-predictable events like that one are stocks with fundamentally compelling reasons for recent momentum. The trick is to find those stocks. That's where Motley Fool CAPS comes in.

The story behind the story
CAPS is no crowd of lemmings. Its best-performing members' opinions do more to shape each company's rating than the picks of their poorer-performing peers. Let's use the collective wisdom of more than 135,000 CAPS members to filter out the noise and find companies offering strong momentum.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with a stock price increase of at least 30% in the past four weeks, a market cap of greater than $100 million, and a beta of less than 3. Below is a sample of stocks that our screen returned. If you'd like, run this screen yourself -- just keep in mind that results may change as the market does.

Company	CAPS Rating (Out of 5)	4-Week Price Change
Petro-Canada	*****	31.9%
Yamana Gold (NYSE: AUY)	****	46.6%
El Paso (NYSE: EP)	****	37.5%
Goldcorp (NYSE: GG)	***	44.4%
Capital One Financial (NYSE: COF)	*	40.9%

Source: Motley Fool CAPS. Price return from May 1 through May 29.

Gold diggers
While the U.S. dollar revisits low levels once again, precious metals such as gold and silver, and even oil, have been going up in price, sending shares of commodity producers like Yamana, Goldcorp, Silver Wheaton (NYSE: SLW), and Petrobras (NYSE: PBR) higher. Both Yamana and Goldcorp increased gold production in their most recent quarters and are planning big production increases to tap the tons of gold they are sitting on. Goldcorp reported a 27% increase in first-quarter earnings, while Yamana grew its profit 36% over last year. Goldcorp has more than 46 million ounces of gold in proven and probable reserves, while Yamana sits on 19 million ounces.

Many CAPS members see all the makings of future inflation, when defensive investments will be far more attractive than alternatives, and hence are bullish on gold and producers like Yamana and Goldcorp. But it's not unanimous, and there's clearly some investors still hedging on investments in gold miners at this point. Looking at the community statistics, nearly 97% of the 3,524 CAPS members rating Yamana expect it to outperform the market, while a less convincing 92.5% of the 1,952 members rating Goldcorp are bullish on its shares.

Gas up
El Paso is not only one of the largest natural gas transporters in the U.S., but also explores for and produces gas, working alongside players like Chesapeake Energy and Devon Energy in the Haynesville Shale, among other places. Huge writedowns in the exploration and production part of the business led El Paso to post a loss of $978 million in the first quarter, but without taking these into account, adjusted earnings far surpassed the average expectation of Wall Street analysts, sending shares on a nice run. Overall, the company's revenue climbed 17% and cash flow from operations grew 20%, with positive free cash flow to boot, so it's not so hard to see why investors were happy about core operations.

With a good read on both the supply and demand sides of natural gas, El Paso's management still sees pressure on gas prices in the short term. But it sees strength in gas in the long term, especially with the increased focus on reducing carbon emissions. Many CAPS members also anticipate increased natural gas use in the U.S. and anticipate plenty of room for growth at El Paso. Today, nearly 97% of the 741 CAPS members rating El Paso expect it to beat the broader market.

Worse-than-expected economic data thwarts rally

NEW YORK -The problem with rising expectations is they get tougher to beat.

Investors broke the stock market's four-day rally and sold off after data on the services industry and factory orders came in below forecasts. Factory orders actually rose in April, but the report disappointed investors who anticipated a larger increase.

The Dow Jones industrial average fell almost 66 points, or 0.8 percent, while the Standard & Poor's 500 index fell 1.4 percent. The Nasdaq composite index, which has been outperforming the other indicators this year, fell just 0.6 percent.

Optimism about the economy stabilizing has lifted the Dow 32.5 percent from its 12-year low reached in early March. Over those three months, topping investors' expectations meant clearing a relatively low bar.

Alan Gayle, senior investment strategist at RidgeWorth Capital Management, said he began increasing his stock holdings in March on signs that economic data was becoming "less bad."

Now, Gayle said, "'less bad' is not good enough."

Even Federal Reserve Chairman Ben Bernanke  was no longer emphasizing signs of economic stabilization on Wednesday, as he has done in recent months. In testimony to Congress, Bernanke focused instead on the government's growing debt load, saying that failing to ease the deficit could undermine efforts to revitalize the economy.

In the last hour of trading, however, some traders bought back into the stock market to take advantage of reduced prices, said Ryan Larson, senior equity trader at Voyageur Asset Management. It's the tactic known as bargain hunting, or "buying the dips," and the move signaled that many market participants still believe the rally has legs.

"At some point, it's hard to fight the trend, and the trend over the last couple of months has been up," Larson said. "People don't want to be left out."

The Dow fell 65.63, or 0.8 percent, to 8,675.24. The Standard & Poor's 500 index fell 12.98, or 1.4 percent, to 931.76. The Nasdaq composite index fell 10.88, or 0.6 percent, to 1,825.92.

The S&P 500 index and Nasdaq pulled back from their highest levels so far this year, reached Tuesday. Both the S&P and Nasdaq are still up for the year, but the Dow has yet to break back into positive territory for 2009. It got within 35 points, or 0.4 percent, of that break-even point on Tuesday.

There were more than twice as many losing stocks as winners on the New York Stock Exchange Wednesday, where volume amounted to 1.3 billion shares, down from 1.4 billion a day earlier.

Some of the biggest declines were in energy, industrial and material stocks ― all areas that have benefited in recent days from gains in oil and commodity prices.

Oil prices pulled back sharply Wednesday after a weeklong rally as the government reported a big jump in crude storage levels, signaling continued weak demand.

As crude shed $2.43 to finish at $66.12 a barrel on the New York Mercantile Exchange, Valero Energy  Corp. sank $3.98, or 17.8 percent, to $18.40, and Sunoco  Inc. dropped $2.27, or 7.5 percent, to $28.03.

Investors in both stocks and energy were displeased with the Commerce Department report showing a smaller-than-expected rise in factory orders. Though it was the second gain in the past three months, orders rose just 0.7 percent in April when analysts had called for a 0.9 percent increase.

Also, the Institute for Supply Management, a trade group of purchasing executives, said the services sector shrank in May at the slowest pace since October. The barometer was below economists' estimates and marked the eighth straight monthly decline.

The rally's staying power will face further tests this week as retailers report May sales results Thursday and as the Labor Department releases its monthly jobs report on Friday. The jobs report is one of the most closely watched indicators of the economy's health.

Matt King, chief investment officer of Oakland, Calif.-based Bell Investment Advisors, said the market's dips are an opportunity for investors to increase their stock holdings.

"We're trying to caution people that just because the market pulls back doesn't mean we're heading back to the bottom," he said.

Still, analysts are keeping a close eye on rising Treasury yields and a weakening dollar. Investors are concerned those factors, largely an outcome of the government's massive stimulus efforts and the improved outlook on the economy, could also hinder a robust recovery.

Rising yields could lead to higher interest rates on mortgages and other types of consumer loans to which they are linked, while a falling dollar could trigger inflation and restrict the buying power of consumers.

On Wednesday, however, both Treasurys and the dollar rebounded.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.54 percent from 3.62 percent. Last week, the 10-year yield surged to a six-month high of 3.75 percent.

The dollar gained ground against the euro and the British pound, while gold prices sank.

The Russell 2000 index of smaller companies fell 3.92, or 0.7 percent, to 522.71.

Overseas, Japan's Nikkei stock average added 0.4 percent, Britain's FTSE 100 fell 2.1 percent, Germany's DAX index fell 1.7 percent, and France's CAC-40 fell 2.0

AP source: GM studying more temporary shutdowns

DETROIT -General Motors Corp. is evaluating the temporary closure of more factories in the third quarter as it tries to control inventory to prepare for its exit from bankruptcy protection, a person briefed on the plans said Wednesday.

Decisions are still being made, but the company wants to have inventory under control before its target of emerging from Chapter 11 in 60 to 90 days, said the person, who spoke on the condition of anonymity because the plans are not final.

The closures wouldn't be as extensive as GM announced for the second quarter, the person said. In April, the company said it would shutter 13 assembly plants for up to 11 weeks starting in May to control a growing supply of cars and trucks.

Company spokeswoman Sherri Childers Arb declined to say whether further shutdowns are under consideration.

"We are taking a look at the schedule right now and no decisions have been made," she said.

Which plants would face additional downtime, if any, depends a lot on how much inventory can be reduced with the current round of shutdowns, some of which will last well into July.

"We're down to 671,000 units in the end of May, we plan to get ourselves down to 525,000 units by the end of the shutdown period," GM Chief Executive Fritz Henderson told The Associated Press Wednesday. "I have every confidence that we'll hit it. So once we get through that, there's no reason to shut more factories down in the third quarter."

GM normally releases third-quarter production estimates with its May sales statistics, but the figures were absent from data released Tuesday.

Mark LaNeve, GM's North American vice president of sales and marketing, told reporters and industry analysts on a conference call Tuesday that the forecast would be released in the next couple of days. GM's total dealer inventory at the end of May is 100,000 fewer than in May of last year, LaNeve said.

But the company wants to cut the inventory further with the summer production cuts, he said. The lower the inventory, the less pressure there is to use incentives to move cars and trucks off the lots.

"We would like to operate with a very lean level of inventory as part of the new reinvented General Motors, and that's exactly what we intend to do," LaNeve said.

Because the daily selling rate for GM vehicles is down due to the slumping U.S. market, its has a 92-day supply of cars and trucks, according to Ward's AutoInfoBank. That's down from a 123-day supply at the end of March. Industry analysts say a 60-day supply is optimal to provide enough of a selection, but not so much that large incentives will be needed to move vehicles.

GM's sales are down 42 percent through the first five months of the year, while the overall U.S. market is down 37 percent, according to Autodata Corp.

Possible targets of a new round of temporary shutdowns would be factories that make vehicles with the highest inventory levels, such as the Chevrolet Silverado pickup with 98 and the hybrid version with 244, the Pontiac G5 with 317 days' supply, and the Saturn Aura with 139.

The Silverado pickup, still GM's most popular vehicle, is made at factories in Pontiac and Flint, Mich.; Fort Wayne, Ind.; and Toluca, Mexico. The Pontiac G5 is made in Lordstown, Ohio, the Aura midsize car is made at a factory in Kansas City, Kan.

Big Three Sales Not as Bad as Feared

NEW YORK (June 2) -- Despite unprecedented turmoil in the auto industry General Motors, Chrysler LLC and Ford Motors all reported auto sales that, while still anemic, were much better than expected.

GM and Chrysler both said they believe their market share increased, and Ford Motor Co. estimated that its May sales helped it to climb to its highest market share in three years.

In their monthly reports all the major automakers said that they believed economic conditions were improving and that auto sales have largely bottomed out.

"Consumer confidence, a key factor in car buying, rose in May by the most in six years and is now at a level not seen since last September," said Michelle Krebs, of Edmunds.com. "This good news couldn't come soon enough for the auto industry, and the benefits are already coming in for most automakers."

Still, a Ford executive said it expected a bumpy recovery.

"This is still a very fragile industry," said Ken Czubay, Ford's vice president of sales, on a conference call with reporters. "It won't be a straight line up from here to the end of the year."

From early tallies, it appears that the auto industry's May sales, as a whole, beat analyst forecasts. Edmunds.com expected industry-wide sales in May to have fallen 36.1% from May 2008, which would be slightly worse than April's 34% year-over-year drop.

General Motors: GM said total car and light truck sales fell 29% compared to a year earlier. That was a much narrower decline than the Edmunds.com analysts' forecast of a 36.9% drop and better than the 33% retreat in April.

"May results really do reflect consumer confidence about GM's long term viability across the globe,"said Mike DiGiovanni, head of market research at GM. "May was a good sign, because of all the press we've had to deal with, and the positive sales results give us a good foundation to build on as we reinvent the company."

The May numbers were unadjusted for the extra day this year.

Its four brands which will be dropped in a restructuring of the company - Pontiac, Saturn, Saab and Hummer - each reported much bigger sales declines than GM's overall drop, the worst being a 63.5% plunge in Saab sales.

GM announced Tuesday it sold its Hummer line to an undisclosed company. A person with knowledge of the deal told CNNMoney.com GM will sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery Company Ltd. in China.

When it emerges from bankruptcy, GM is expected to continue with its four core brands, Chevrolet, Buick, GMC and Cadillac. Collectively, those brands' sales were up 18% from April to May, compared to 11% month-over-month increase company-wide.

After it drops four of its brands, GM acknowledged that it will likely lose a sliver of its market share. But the company said it believes it will be able to make up some of the lost share with its core brands.

Chrysler: Chrysler, which entered bankruptcy on April 30, also reported better than expected sales in May.

Sales tumbled 47% from May 2008, better than the 53.9% drop forecasted by analysts. Like its rivals, Chrysler also reported the best retail sales of 2009.

"We are pleased that consumers responded to Chrysler's reorganization by purchasing our products," said Jim Press, Chrysler president, in a statement. "The uncertainty that has been surrounding Chrysler for the last few months is coming to an end, and a vibrant, new company is beginning to take shape."

Ford: Ford Motor Co. reported Tuesday its U.S. auto sales were the highest since July 2008, even as sales fell 24.3% from last year.

Ford's year-over-year sales drop was a narrower than analysts' forecast of a 28.5% drop and much improved over the 32% retreat in April.

Despite flailing competitors, the company said it believed the sales improvement from April to May had more to do with increasing consumer demand than turmoil at GM and Chrysler. Accordingly, Ford said it will begin to raise its production as the company sees sales beginning to pick up.

Though Ford's car models fell by 25.5%, sales of its mid-sized Fusion model were actually up 9.4% last month, the only Ford brand model that rose from last year. Crossover SUV sales dropped 9%, and traditional SUV sales tanked 37.4%. Overall, Ford truck sales fell 23.4%.

Toyota: Japanese automaker Toyota Motor Corp. said its May sales tanked 40.7% from May 2008, slightly worse than analysts' expectation of a 40.6% decline.

Ford's domestic brands outpaced Toyota's for the second straight month, making it the second-largest automaker in terms of monthly U.S. sales behind GM.

Still, Toyota, like Ford and GM, reported its highest monthly sales total of 2009. The company cited a "big jump" in consumer confidence in May for the improved month-over-month results.

"We're encouraged that consumers are beginning to return to showrooms and that the industry continues to show signs of stabilization," "said Don Esmond, Toyota's senior vice president of automotive operations, in a statement.

Also Tuesday, rival Japanese automaker Nissan reported May sales fell 33.1%, better than the 35.1% analysts expected. And Honda Motor Co. reported sales dropped 41.5% in May, slightly worse than the 39.3% forecasted by analysts.