MarketView for May 29

Summary

The major equity indexes were higher on Tuesday as signs that Greece would remain in the euro zone were enough to spark buying in what has been a weak month for equities, while Facebook plumbed new lows on high volume.

Wall Street has swung back and forth on shifting signals coming out of Europe due in part to weekend polls favoring pro-bailout parties in the upcoming Greek election.

The S&P 500 is down nearly 5 percent in May; so far its worst monthly performance since September, with traders backing away as the euro zone crisis shows signs of worsening.

The market could remain on edge as the June 17 Greek elections draw closer, as a rejection of the bailout plan could trigger a Greek exit from the euro zone and badly hurt the bloc's credit and economies.

Concerns regarding Spain's banking system added to uncertainty. Madrid will soon issue new bonds to fund ailing lenders and indebted regions, despite borrowing costs rising towards the 7 percent level that drove other euro zone countries to seek a bailout.

Equity gains notwithstanding, the pressure on Spanish banks pulled the euro below $1.25, making it the lowest point in nearly two years. Further dollar strength could bring commodity prices lower and hurt global stock markets.

Facebook, the second-most traded stock within the major equity exchanges on Tuesday, hit a new low of $28.65, down more than 10 percent, before closing off 9.6 percent at $28.84. The stock was pressured partly by talk Facebook was in discussions to buy Oslo-based Opera Software. Analysts said competition from Google and others could push the price tag of any deal with the mobile browser maker above $1 billion.

Homebuilder stocks rose after data showed U.S. home prices rose for the second month in a row in March.

Vertex Pharmaceuticals fell 10.9 percent to $57.80 after the Company released corrected data involving its cystic fibrosis treatments.

Economic Data Mixed

Home prices moved somewhat higher for the second month in a row in March as the housing recovery picked up traction, while gains in some of the hardest hit areas suggested the improvement was becoming more broad-based. At the same time, consumer confidence cooled in May to its lowest level in four months, separate data showed on Tuesday, as Americans turned gloomy about the job market and the economic outlook.

The closely watched S&P/Case Shiller composite home price index of 20 metropolitan areas gained 0.1 percent in March on a seasonally adjusted basis, though it fell shy of economists' forecasts for a gain of 0.2 percent. The housing market has been a problem for the broader economic recovery but the sector has been gathering momentum with new construction and sales rising in April.

Prices in the 20 cities fell 2.6 percent from a year ago, an improvement from the 3.5 percent yearly decline seen last month. Seven of the 20 cities saw price increases from a year ago, including hard-hit Detroit and Phoenix. According to the report, the pace of declines slowed, the indexes were still plumbing new post-financial-crisis lows. Prices were down 2 percent in the first three months of the year following a 3.9 percent decline in the last three months of 2011.

"It's an optimistic sign, but I think it's still unclear," said Robert Shiller, Yale economics professor and co-creator of the index.

"We have been in a flat place for several years. We are showing signs of breaking out, but these are the signs we saw in previous years that fizzled, so I don't know where we are going in the near-term future," Shiller was quoted as saying.

A report from industry group the Conference Board showed consumer confidence fell to its lowest level since the start of the year, making for the third month of declines. The index of consumer attitudes fell to 64.9 from a downwardly revised 68.7 the month before, confounding expectations for a gain to 70.0.

The figures were in contrast to last week's University of Michigan survey that showed consumer sentiment rose to its highest level in more than four years.

Consumers' view of the labor market soured with 41.0 percent saying jobs were hard to get, up from 38.1 percent the month before, while 7.9 percent said jobs were plentiful, down from 8.4 percent.

The retreat in Americans' assessment of both their present situation and outlook suggests the pace of economic growth in the coming months could moderate, Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. However, consumers were more upbeat on income prospects with 15.2 percent expecting an increase compared to 13.9 percent in April.

Purchasing plans also improved and 10.4 percent said they had plans to buy an automobile within the next six months, up from 9.9 percent last month. Those anticipating major appliances purchases rose to 45.3 percent from 44.6.