Stocks Strong, Oil Hits Record

The July contract for New York's benchmark crude rallied $1.89 to a record of $58.47 a barrel. December oil futures exceeded $60. The closure of U.S. and British consulates in oil-rich Nigeria after a telephoned threat added to jitters about rising global demand and the limited capacity of U.S. refineries.

But share buyers merely used that as an excuse to snap up oil drillers. The Dow chugged 44 points north to 10623, extending its winning streak to a lucky seven. The Nasdaq's one-point stretch pushed it to 2090. The S&P 500 shot up 6 to a three-month high of 1217, vaulting back into the plus column for the year.

Home builders, commodity suppliers and biotechs led the way as metal prices tracked the rise of oil. Copper appreciated 2%, as did the shares of mining machinery maker Caterpillar (CAT). Airlines, retailers and auto makers sweated the fallout from costly gasoline and jet fuel.

The expiration of option and futures contracts pumped up the morning's heavy trading volume, before the market shifted into cruise control.

Former Tyco International (TYC) boss L. Dennis Kozlowski and his chief financial officer, Mark H. Swartz, were found guilty of grand larceny, conspiracy and fraud by a jury hearing their retrial.

Al Jazeera broadcast a recording by senior Al Qaeda leader Ayman al-Zawahri, who took issue with U.S. plans to reform the Middle East.

The dollar slipped as the U.S. current-account deficit hit a record $195 billion for the first quarter, much of it consisting of imported merchandise bought on credit. The current-account gap now stands at 6.4% of the gross domestic product.

Bank of America's (BAC) billions will be going the other way, zipping to China in a big bet that the country's banking system can be saved from a morass of corruption and bad debt. The U.S. giant will spend $3 billion on a 9% stake in the China Construction Bank, the country's second-largest, with an option to boost its ownership to nearly 20% by 2010. That's the largest foreign investment to date in the Chinese banking sector. Bank of America shares rose less than 1%.

The deal gives BofA access to the Chinese bank's 14,500 branches and its claimed $472 billion in assets, some of which may not consist of sweetheart loans to other state-owned enterprises. Bank of America will bring its risk-management expertise to the party, good news for a Chinese partner that lost one deputy branch manager to a firing squad last year. He'd been accused of supporting eight mistresses with the bank's funds, according to the Associated Press.

Construction back home is booming as well, proved KB Home's (KBH) 78% profit rise, which topped the consensus estimate by 19%, or 33 cents a share. "Consumer demand in our markets remains vibrant, fueling strong growth," said the boss. Sales jumped 36% in a year's time. KB Home boosted its annual earnings forecast to $9 a share, a buck more than Wall Street was expecting. Its stock sold for less than $9 in May 2000. It rose 7% to more than $77 a share Friday. But the price-earnings ratio remained stuck below 9. The S&P Homebuilding Index soared 4%.

Adobe's (ADBE) trailing P/E ratio stands at rather loftier 33, which is why the desktop software maker's 37% upside profit gain mattered less than its cautious forward guidance. The low end of third-quarter sales and earnings projections trailed expectations. So while the analysts remained upbeat, the stock dropped 3%.

Trans-Pacific acquisitions are a two-way street according to the South China Morning Post, which reported that China National Offshore could soon challenge Chevron's (CVX) friendly bid for Unocal (UCL). The Chinese drilling giant lusts after Unocal's rights to Asian natural-gas reserves, and has reportedly assembled financing for an $18 billion counteroffer, though other sources told Reuters the hostile bid remains in doubt. Chevron has offered $16.4 billion in cash and stock. Unocal shares rose almost 4%, while Chevron added 2%.

Refiner Valero (VLO) has also been rumored to be a takeover candidate. But the immediate catalyst came from a sharply improved profit outlook, as the company projected quarterly earnings of $3 a share, 55 cents above the consensus estimate. It's benefiting from rising margins as prices of gasoline and heating oil outpace the cost of heavy crude. The stock surged 4%.

Best Buy's (BBY) recent blowout results offered scant comfort to shareholders of rival Circuit City (CC), which got discounted 4% after reporting a wider loss.

Consumers surveyed by the University of Michigan have cheered up recently as the stock market's fortunes improved, pushing that sentiment index eight points higher to nearly 95. But the bond market didn't feel left out. The 10-year Treasury yield idled near 4.07%.