MarketView for June 5

Summary

The major equity indexes were all higher on Tuesday, recovering some ground from last week's selloff, after an ISM report indicated that the services sector improved in May. Financial stocks ranked among the best performers, significantly outperforming other sectors. Bank of America ended the day up 2.9 percent to close at $7.10, while JPMorgan added 3.2 percent to end the trading day at $31.98.

However the rebound was expected to be temporary as market sentiment remained bearish in the face of the euro zone's debt crisis and a slew of recent data that showed the world's largest economy was experiencing slower-than-expected growth.

The market could also be setting itself up for disappointment, with the European Central Bank meeting on Wednesday and Fed Chairman Ben Bernanke testifying on the economy before a congressional committee on Thursday. The ECB meeting could have an impact on the euro crisis if the bank signaled a willingness to take action that would alleviate the financial stresses on Europe.

The pace of growth in the services sector picked up in May as a gauge of new orders improved, according to an industry report. The Institute for Supply Management's services index edged up to 53.7 in May from 53.5 in April, a touch above economists' forecast for it to hold steady.

The ISM data let investors breathe a brief sigh of relief after a number of negative economic reports. Those reports and concerns about the euro zone drove the S&P 500 down more than 6 percent in May.

Last Friday the three major equity indexes fell more than 2 percent with the Dow Jones Industrial Average turning negative for the year after much weaker-than-expected non-farm payrolls in May.

Spain's Treasury Minister Cristobal Montoro said the nation's high borrowing costs have effectively shut the euro zone's fourth-largest economy out of the bond market and the European Union should help Madrid recapitalize its debt-laden banks.

Statements after emergency talks by the finance chiefs of the Group of Seven industrialized nations on the euro zone's deepening crisis gave investors little clarity. Japan's finance minister said he told G7 members that Japan is confident in Europe's response to its problems, but indicated Tokyo was prepared to intervene in order to curb its currency.

Most major economies in the euro zone are now in various states of decline, according to business surveys that suggested even Germany is no longer immune to the crisis.

Facebook fell 3.8 percent to $25.87, down 31 percent from the social networking giant's market debut on May 18.

About 6.05 billion shares changed hands on the three major equity exchanges,  a number that was slightly lower than the year-to-date daily average of 6.85 billion shares.

Growth Continues in Service Sector

The pace of growth in the services sector edged up in May driven by gains in new orders, a welcome comfort after recent disappointing economic data. The Institute for Supply Management (ISM) said on Tuesday its services index edged up to 53.7 from 53.5 in April. A reading above 50 indicates expansion in the sector, which accounts for about two-thirds of economic activity.

Although the data offered a positive note after other recent signs suggesting the recovery is losing traction, the index was still well off the level of 57.3 seen in February.

The survey's forward-looking new orders component rose to a reading of 55.5 from 53.5, while the measure of prices paid declined to the lowest level since July 2009, at 49.8 from 53.6.

The decline in prices was attributed to lower fuel costs, said Anthony Nieves, chair of the ISM non-manufacturing index business survey committee.

Other data released on Tuesday was more encouraging, with a rise in home prices in April seen as a fresh sign of stabilization for the troubled housing market. Data analysis firm CoreLogic said its home price index rose 2.2 percent in April from the previous month and gained 1.1 percent from the year before. Excluding sales of distressed properties, which are typically sold at a significant discount, prices jumped 2.6 percent for the month and were up 1.9 percent on a yearly basis.