By Greg Peel

The Dow closed down 25 points or 0.2% while the S&P lost one point to 1316 and the Nasdaq fell 0.5%.

It's probably safe to say that “low” volume on Wall Street is now the new normal, otherwise we'd just be calling volume “low” every day. The lack of interest in stocks at present compared to the bull run and the GFC dump explains to a great extent why this current correction has shown no signs of panic on the downside but also a lack of any traction on the upside. The “Sell in May” adage has always been related to the traditional drop in interest as the northern summer approaches and market players plan holidays, and this year the excitement level is as low as it's ever been.

It was a choppy session on Wall Street last night as the Dow bounced between 40 up and 30 down before settling down 25. Stability in the euro ensured the tighter range.

The US new home sales number for April was released last night and surprised economists with an 8.3% jump when a slight decline was expected. This is another one of those numbers economists rarely get right due to monthly volatility, and any enthusiasm waned as traders recognised that strong March and April moves are really just a rebalancing out of February's snowbound shocker, and that new home sales are still down 23% year on year.

Following sharp pullbacks in expansion of activity levels in both the New York and Philadelphia Fed districts this month, last night the Richmond Fed index told a similar tale. It fell to 9 from 28.

The home sales number was nevertheless enough to set off a bit of selling in the US dollar after its recent rebound, and that allowed a bit of strength in the euro following the opposite. Markets are positive about Greece's plan to fast-track the privatisation of various government businesses as part of its debt reduction agenda. In the meantime markets also await the outcome of the current G8 leaders meeting in Paris to see if anything new emerges.

The big news of the day, however, came from the energy market. Having made its sell call close to the recent peak in the oil price and picked a winner, Goldman Sachs last night went long again in increasing its forecasts for year-end 2011 and 2012 by US$20, taking them to US$120/bbl and US$140/bbl for Brent crude. Morgan Stanley at the same time raised its equivalent forecasts to US$120 and US$130 from US$100 and US$105, while JP Morgan reiterated its end-2011 forecast of US$130.

The result, aided by a 0.3% drop in the US dollar index to 75.90, was a US$2.43 jump in Brent to US$112.53/bbl and a US$1.72 jump in West Texas to US$99.42/bbl, roughly reversing Monday night's falls. All of the analysts cite increasing emerging market demand met by constrained supply out of both MENA (Libya) and non-OPEC producers, the latter struggling with lower production rates.

And it wasn't just oil in the spotlight, with Goldmans also suggesting copper and zinc are now cheap and JP Morgan suggesting price volatility will remain in base metals but downside is limited. Zinc was subsequently up 2.5% last night and copper 0.5%, with the others all making 0.5-2% gains.

No one said any about silver but having gone nowhere for three days despite dollar strength, the hint of dollar weakness had silver bouncing out of its slumber and jumping 5% last night to US$36.63/oz. It's still a long way back to the US$50 peak. Gold added another US$9.10 to US$1526.10/oz.

The US Treasury has a knack of scheduling auctions when euro-jitters are heightened, and last night's auction of two-years was well bid despite a yield of 0.5% suggesting a negative real return. The demand was nevertheless mostly domestic once again, with foreign central banks taking 31% compared to a running average of 32%.

A weaker greenback and stronger commodity prices saw the Aussie up 0.5% to US$1.0558.

The SPI Overnight gained 3 points.

[Note: All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.]

FN Arena is building the future of financial news reporting at www.fnarena.com . Our daily news reports can be trialed at no cost and with no obligations. Simply sign up and get a feel for what we are trying to achieve.

Subscribers and trialists should read our terms and conditions, available on the website.

All material published by FN Arena is the copyright of the publisher, unless otherwise stated. Reproduction in whole or in part is not permitted without written permission of the publisher.