MarketView for May 23

Summary

The S&P 500 ended above 1,900, just below a record intraday high of 1,902.17 set on May 13 and above its record closing high of 1,897.45 the same day. Eight of the 10 S&P sector indexes ended higher for the day. The Dow Jones Transportation Average rose 0.8 percent to close at a record high, after hitting a lifetime intraday high of 7,995.39.

Housing stocks ranked among the market's biggest outperformers. Big tech names like Apple and Amazon lifted the Nasdaq and helped it outperform the broader market. Apple ended the day up 1.1 percent at $614.13. Amazon rose 2.4 percent to $312.24.

Hewlett-Packard was up 6.1 percent to $33.72. The stock was among the S&P 500's best performers a day after the personal computer maker said it may cut as many as 16,000 more jobs in a major ramp-up of CEO Meg Whitman's years-long effort to turn the company around and relieve pressure on its profit margins.

The CBOE Volatility Indexfell 5.6 percent to end at 11.36, its lowest level since March 2013. Known as Wall Street's fear index, the VIX is extremely low by historical standards.

The S&P 500 posted its fifth daily advance out of the past six sessions, and its first weekly gain out of the past three. For the week, the Dow rose 0.7 percent, the S&P 500 jumped 1.2 percent and the Nasdaq gained 2.3 percent.

Housing stocks rallied for a second day after data from the Commerce Department showed sales of new single-family homes rose more than expected in April and the supply of houses on the market hit a 3-1/2 year high.

Shares of Lennar, the second-largest homebuilder in terms of revenue, ended the day up 4 percent at $40.54. The stock of top homebuilder D.R. Horton was up 4.1 percent, closing at $23.57.

The Russell 2000 index of small-cap shares rose 1.1 percent, outperforming the broader S&P 500. The Russell fell into correction territory last week - defined as a 10 percent decline from a recent closing high.

Among transportation stocks, about a quarter of the Dow Jones Transportation Average hit new 52-week highs, including three airlines - Delta, Southwest and Alaska Air - and two railroads - Norfolk Southern and Union Pacific.

FedEx rose 1.6 percent to end the day at $141.50.

Bucking Friday's modest upswing was Aeropostale, which fell 24.6 percent to $3.41 after the teen apparel retailer forecast a larger-than-expected loss for the current quarter.

Volume was light going into the Memorial Day holiday weekend, when the markets will be closed on Monday. About 4.6 million shares traded on the major equity exchanges, a number that was below May's average of 5.9 million shares, according to BATS exchange data.

New Home Sales Recover

The Commerce Department reported on Friday morning that sales of new single-family homes increased 6.4 percent to a seasonally adjusted annual rate of 433,000 units, ending two straight months of declines, thereby reaching a 3-1/2 year-high, further signs the sputtering housing recovery was poised to regain steam.

At the same time, March's sales pace was revised up to 407,000 units from a previously reported 384,000 units. Note that the government made revisions to the model it uses to adjust the data for seasonal fluctuations, which affected only the monthly data.

An increase in mortgage rates last year and rising home prices, which have outpaced wage growth, are weighing on housing. Home sales are also being hampered by a shortage of properties. But there are signs a turnaround is imminent.

Sales of previously owned homes increased in April and the inventory of houses was the highest in nearly two years, a report showed on Thursday.

According to Freddie Mac, the fixed 30-year mortgage rate fell to an average of 4.14 percent this week, a near seven-month low, from an average of 4.20 percent the prior week. That should help to improve affordability.

Last month, new home sales rose sharply in the Midwest to their highest level since November 2007. Sales also rose in the South, but were flat in the West. In the Northeast, sales recorded their largest decline since October 2012.

The inventory of new houses on the market increased 0.5 percent to 192,000 units, the highest level since November 2010. While the stock of new houses on the market has come off a record low hit in July 2012, it remains less than half of its pre-recession level.

At April's sales pace it would take 5.3 months to clear the supply of houses on the market, down from 5.6 months in March. With inventories improving, the median price of a new home last month fell 1.3 percent to $275,800 from April last year.