Investors were encouraged by better than expected data on pending home sales. Financial shares were weaker as more big banks announced equity sales
U.S. stocks finished a choppy session mostly higher Tuesday, as buying spurred by a better-than-expected reading on the the National Association of Realtors' index on pending home sales for April offset weakness in financial stocks as Morgan Stanley (MS), American Express Co. (AXP), JPMorgan Chase & Co. (JPM), and SunTrust (STI) priced stock offerings.
On Tuesday, the 30-stock Dow Jones industrial average finished higher by 19.43 points, or 0.22%, at 8,740.87. The broad Standard & Poor's 500 index added 1.87 points, or 0.20%, to 944.74. The tech-heavy Nasdaq composite index rose 8.12 points to 1,836.80.
Treasuries, gold futures and crude oil futures rose. The dollar index fell.
On Monday, stocks rallied following better-than-expected data on manufacturing, construction spending, and personal income. Both the Standard & Poor's 500 and Nasdaq composite indexes rose to their highest levels this year.
Overseas markets were narrowly mixed Tuesday, while oil prices were mixed following a surge Monday on upbeat readings on manufacturing activity in the U.S., China and Europe.
The National Association of Realtors stated that pending home sales (based on contracts signed in April) jumped 6.7%, its third consecutive increase. The index is now up 3.2% from a year earlier. Jumps were concentrated in the Midwest and Northeast. The increase reflects in part the new tax credit, but also high affordability. The Realtors' affordability index jumped to a 174.8 in April, from 171.9 in March, just below the record 176.9 set in January. Lower home prices and lower mortgage rates have improved affordability. The new ability to use the $8,000 tax credit as a down payment on a home alleviated the remaining obstacle - lack of funds for a down payment.
Pending home sales are a leading indicator for actual sales, which are counted when the final deed is transferred, usually 1 to 2 months later.
After the market closes Tuesday, homebuilder Hovnanian Enterprises (HOV) will report second-quarter results.
Investors have been encouraged this spring by data suggesting the economy's slide is slowing, sending stocks up more than 30% from 12-year lows in early March. The market has been able to look past such unnerving events as the bankruptcy filings of the nation's two largest automakers, as well as dismal reports on the labor market.
Analysts warn that some pullback is necessary for the market to maintain a solid, healthy advance, noting that volatility will likely be the norm for some time. This week investors will be closely watching a spate of economic reports -- particularly the crucial monthly jobs data on Friday -- for more signals on where to take the market next.
Financial stocks were in focus Tuesday after JPMorgan Chase and American Express became the latest banks to announce stock offerings in an effort to repay federal bailout funds. JPMorgan said late Monday it plans to raise $5 billion to help repay a $25 billion government loan, while American Express is seeking to raise $500 million to help pay back part of its $3.4 billion in rescue funds.
Meanwhile, Goldman Sachs Group (GS) has sold part of its stake in Industrial & Commercial Bank of China to raise more than $1.9 billion to help repay bailout money.
Banks not required by the government to raise additional capital that want to repay bailout funds must first prove they can raise money without relying on guarantees against losses provided by the Federal Deposit Insurance Corp.
Just a day after General Motors Corp. filed for bankruptcy protection, the automaker said it has entered an agreement to sell its Hummer brand, which would likely save more than 3,000 U.S. jobs.
GM reported May sales much stronger than expected, with a decline of 29% year-over-year. Ford (F) reported sales down 20% from a year earlier. Daimler (DAI) reported sales off -33%, while Nissan (NSANY) was also down 33%.
In technology news, data storage company EMC Corp. (EMC) offered late Monday to buy Data Domain Inc. for $1.8 billion, or $30 per share. The all-cash offer came less than two weeks after NetApp Inc. (NTAP) made its own bid for the company at $25 a share.
Overseas, Japan's Nikkei stock average rose 0.3%, while European indexes were mixed. Britain's FTSE 100 was down 0.65%, Germany's DAX index rose 0.03%, and France's CAC-40 was down 0.04%.