Dow jumps 123 on Best Buy results, China growth

Updated: 9:50 p.m. ET

For today at least, everybody was a bull. Stocks jumped on  earnings from Best Buy (BBY), retail sales and industrial output in China -- all of which were better than expected -- and a key hire at JC Penney (JCP).

The result was the best day for stocks so far in June, with the major averages sporting gains of 1% or more. But late-day selling sapped some of the rally's strength. Crude oil (-CL) and gold (-GC) were higher, and the 10-year Treasury yield topped 3% for the first time in a week.

But before you get too excited, consider: Short-covering -- short-sellers buying stocks to lock in profits -- was a big force in today's rally. A key to the market's prospects was whether the Standard & Poor's 500 Index ($INX) could close decisively above 1,288, an important resistance level. The index closed at 1,287.87. It may take more work to get the index to 1,300.

The Dow Jones industrials ($INDU) closed up 123 points, or 1%, to 12,076, the best gain since May 31.  The S&P 500's gain was 16 points, or 1.3%. The index ended with its best gain since April 20. The Nasdaq Composite Index ($COMPX) was up 39 points, or 1.5%, to 2,679, its best day since April 20.

Article continues below.But the finish did not radiate confidence. The Dow gave up a quarter of its gain in the last hour of trading. The Nasdaq's gain shrank by 15% in the last hour. So Wednesday will be an important day of trading. Futures trading suggests a down open.

The government will issue its monthly Consumer Price Index report, and the Federal Reserve Bank of New York will report on manufacturing in New York state.

Pandora goes public at $16; generates $2.6 billion valuation
Trading is expected to begin in shares of Internet radio operator Pandora, whose initial public offering of 14.7 million shares priced at $16 a share late today.  That was twice what was originally expected. The IPO puts a $2.6 billion value on the company.

It will start trading Wednesday on the New York Stock Exchange with the ticker "P."

The valuation comes despite the company's modest size and will reignite the debate over whether a bubble is emerging around social networking sites.

Pandora had only $55.2 million in revenue in its 2010 fiscal year and $89 million in the first nine months of its 2011 fiscal year and has never earned a profit for a full year.

The company lost $16.8 million in fiscal 2010 but broken even in the first nine months of fiscal  2011. The fiscal year ends on Jan. 31.

Rally moves crude prices higher
Crude oil settled up $2.07 to $99.37 a barrel but was drifting lower in electronic trading. Gold settled up $5.40 to $1,521.20 an ounce in New York and was higher still in electronic trading, and silver added 40.3 cents to $35.14 an ounce. The 10-year Treasury yield pushed to 3.099% from Monday's 2.991%.

While Best Buy's results were welcome, the rally really began overnight in Asia after China reported stronger-than-expect​ed industrial output. Japanese stocks promptly moved higher. European stocks were also stronger.

The rally was quite broad. Twenty-four of the 30 stocks were higher, along with 90 stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks. The index was up 28 points, or 1.3%, to 2,250.

Advancers were ahead of decliners 3.3-to-1 on Nasdaq and 5-to-1 on the New York Stock Exchange. Volume was fairly average.

Energy, industrial and consumer discretionary stocks were the strongest S&P 500 sectors. None of the 10 sectors was falling back.

Home Depot (HD), Caterpillar (CAT), Boeing (BA) and Alcoa (AA) were the Dow leaders. Home Depot, up 4.5% to $34.75, was rising on the coattails of Best Buy.

JC Penney, Lorillard (LO) and Cabot Oil and Gas (COG) were the top S&P 500 stocks. Baidu (BIDU), Green Mountain Coffee Roasters (GMCR) and Chinese online travel siteCTrip.com International (CTRP) were the top Nasdaq-100 stocks.

Energy prices -- New York close
			Tues.			Mon.			Month chg.			YTD chg.
Crude oil (-CL)			$99.37			$97.30			-3.24%			8.74%
(per barrel)
Heating oil (-HO)			$3.13			$3.11			2.38%			22.88%
(per gallon)
Natural gas (-NG)			$4.58			$4.65			-1.82%			4.00%
(per mil. BTU)
Unleaded gasoline (-RB)			$3.06			$3.00			-2.72%			24.92%
(per gallon)
Brent crude			$120.00			$119.10			2.94%			26.82%
(per barrel)
Retail gasoline			$3.70			$3.70			-2.22%			20.31%
(per gallon; AAA)

Best Buy's a winner; JC Penney may be a bigger winner
Best Buy was the best performer among S&P 500 stocks, 4.6% to $30.13. The company said rising demand for smartphones and tablet computers offset declining sales for televisions. Profit of 35 cents a share was off 12% from a year ago but beat Street estimates for 33 cents.

Sales by stores open at least 14 months fell 1.7%, including a drop of 2.4% in the U.S. Analysts had projected a domestic decline of 4%.

But JC Penney overtook Best Buy as the top S&P 500 performer, rising 17.5% to $35.37  on news it has hired Ron Johnson, head of Apple’s (AAPL) iconic retail stores, as its new president. He will become CEO in the next few months, succeeding longtime leader Myron "Mike" Ullman.

Johnson joined Apple from Target (TGT), where he had been vice president of merchandising for stores. Johnson has won kudos for reinventing the concept of the retail store at Apple.

China's output cheers; so does US retail sales
The news from China that cheered investors was this: China’s industrial production rose 13.3% in May. Investors shrugged off its report that inflation was rising at a 5.5% annual clip and news that China was requiring banks to boost reserves to quell inflation.

Meanwhile, the Census Bureau reported a 0.2% dip in May retail sales. That was better than the expected 0.7% decline. What really cheered the Street was that sales, excluding auto sales, rose 0.3%. The estimate had been for a 0.2% increase.

Auto sales fell 2.9%, the biggest decline since June 10. The decline reflects the disruptions caused by the March 11 Japanese earthquake and tsunami.

Some of the drop in demand last month reflected a shortage of Japanese-made vehicles after the disaster disrupted supplies. With inventories running low, companies offered smaller discounts, which also deterred buyers.

Short hits from the markets -- New York close
			Tues.			Mon.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.040%			0.040%			-20.00%			-66.67%
5-year Treasury note			1.687%			1.589%			-0.06%			-16.32%
10-year Treasury note			3.099%			2.991%			1.61%			-6.23%
30-year Treasury bond			4.301%			4.205%			2.02%			-1.40%
Currencies
U.S. Dollar Index			74.692			74.874			-0.01%			-5.80%
British pound			$1.6399			$1.6383			-0.43%			5.08%
(in U.S. $)
U.S. $ in pounds			£0.6098			£0.6104			0.43%			-4.84%
Euro in dollars			$1.4443			$1.4422			0.06%			7.94%
(in U.S. $)
U.S. $ in euros			€ 0.6924			€ 0.6934			-0.06%			-7.36%
U.S. $ in yen			80.71			80.20			-1.13%			-0.81%
U.S. $ in Chinese			6.51			6.48			0.07%			-1.65%
yuan
Canada dollar			$1.031			$1.025			-0.28%			2.77%
(in U.S. $)
U.S. dollar			$0.970			$0.975			0.27%			-2.70%
(in Canadian $)
Commodities
Gold (-GC)			$1,524.20			$1,515.60			-0.81%			7.25%
(per troy ounce)
Copper (-HG)			$4.1550			$4.0345			-0.54%			-6.57%
(per pound)
Silver (-SI)			$35.4110			$34.7370			-7.56%			14.46%
(per troy ounce)
Wheat (-ZW)			$7.3125			$7.4300			-6.52%			-7.93%
(per bushel)
Corn (-ZC)			$7.5550			$7.8250			1.07%			21.37%
(per bushel)
Cotton			$1.5554			$1.5095			-1.97%			7.41%
(per pound)
Coffee			$2.6925			$2.6745			1.76%			11.95%
(per pound)
Crude oil (-CL)			$99.37			$97.30			-3.24%			8.74%
(per barrel)