MarketView for May 25

Summary 

The major equity indexes ended their first positive week in four with a down day on Friday as investors were reluctant to buy going into a long weekend, with uncertainty still swirling around Europe. Unfortunately, weakness in large-cap tech stocks such as Google kept the Nasdaq in negative territory. . Google ended the day down 2 percent to close at $591.53, pressuring the Nasdaq.

Warnings about Greece also kept investors cautious, as did Spain after Standard & Poor's downgraded five banks and Bankia asked for $24 billion in state aid. However, a bullish read on consumer sentiment in the United States kept pessimism in check.

Boeing and Chevron were the Dow's biggest decliners, followed by Caterpillar, with each falling more than 1 percent in the thinly traded session

Belgium's Deputy Prime Minister Didier Reynders issued a warning over Greece, saying it would be a "grave professional error" if central banks and companies were not preparing for a Greek exit from the euro zone.

French banks, which are among the lenders most exposed to Greece, have stepped up their efforts on contingency plans for the debt-laden country leaving the euro zone, sources familiar with the situation said.

The U.S. stock market will be closed on Monday for the Memorial Day holiday.

For the week, the S&P 500 was up 1.7 percent. That advance broke the benchmark index's a three-week string of losses with its best weekly performance since mid-March. The Dow added 0.7 percent for the week, while the Nasdaq climbed 2.1 percent. Trading was choppy all week, with volatility often spiking around the close.

Even with the S&P 500's 5.7 percent drop since the end of April, stocks have held up relatively well as bear markets rage in Brazil, Russia, peripheral Europe, and many core European equity markets have given up all their gains for the year. For the year to date, the S&P 500 is still up 4.8 percent.

The S&P 500's top gainer in Friday's session was telecom services - a sign that investors were looking for safety in defensive U.S. sectors, possibly as money returns from riskier emerging markets and Europe.

At the end of last week, the S&P 500 tested support at the 1,290 mark and has inched away from that level during the week. Some analysts are expecting the benchmark index to test its 200-day moving average at 1,281 and possibly fall below that.

Weighing heavily on the Dow in Friday's session, Boeing lost 1.9 percent to end the day at $70. Chevron's shares fell 1.2 percent to $98.86. Caterpillar fell 1.6 percent to close at $89.94.

Chesapeake Energy gained 1.5 percent to $15.81, rising for the second day after the company announced it has put a half-million acres in Wyoming and Colorado up for sale.

The Thomson Reuters/University of Michigan Surveys of Consumers' final May consumer sentiment index rose to 79.3 from 77.8 in the preliminary May report. It was the highest level since October 2007.

In the aftermath of last Friday's botched initial public offering of Facebook, lead underwriter Morgan Stanley will adjust thousands of trades to ensure outstanding limit orders to sell will be filled at no more than $42.99 a share, the firm told its brokers on Thursday, according to several who listened to the call. Facebook's stock lost 3.4 percent to close at $31.91, close to its all-time intraday low of $30.94 that it hit on Tuesday.

Volume was light, with about 4.78 billion shares changing hands on the three major equity exchanges, a number that was well below last year's daily average of 7.84 billion shares.

Consumer Sentiment Highest in Four Years

Consumer sentiment rose to its highest level in more than four years in May as Americans stayed optimistic about the job market, while higher income households expected to see bigger wage increases, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same. It was the highest level since October 2007.

Half of all consumers said the economy had improved during the past year, while buying plans for vehicles and household durables also improved. The gauge of buying plans rose to 132 from 126. Higher income households anticipated a 2 percent income increase in the year ahead, while lower income households expected just a 0.3 percent gain.

The survey's barometer of current economic conditions jumped to 87.2 from 82.9, while its gauge of consumer expectations improved to 74.3 from 72.3. The indexes were at their highest levels since January 2008, and July 2007, respectively.

The survey's one-year inflation expectation eased to 3.0 percent from 3.2 percent, while the survey's five-to-10-year inflation outlook dipped to 2.7 percent from 2.9 percent.