Stock Market News for May 31, 2011 - Market News

Investor sentiment was bolstered on Friday, as gas prices eased off and economic data struck a positive note. However, the modest gains ahead of the Memorial Day holiday were not strong enough to prevent a fourth consecutive week of losses for the indices.

The Dow Jones Industrial Average (DJIA) gained 0.3% to settle at 12,441.58. The Standard & Poor 500 (S&P 500) was up 0.4% and ended at 1,331.10. The Nasdaq Composite Index finished at 2,796.86, after rising 0.5%. Markets rose for the third consecutive day, but the modest gains failed to wash out the losses suffered earlier in the week. This was the first time since February 2010 that markets have been in the red for four consecutive weeks. For the week, The Dow, S&P 500 and Nasdaq were down 0.6%, 0.2% and 0.2%, respectively. Consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were only 5.44 billion shares against last year’s estimated daily average of 8.47 billion. This was also the second lowest level of trading volumes for the year. On the NYSE, for every three stocks that gained, one stock moved down.

Consumers gained relief from lower gas prices in May, which had earlier surged to $4 in April. Global turmoil had pushed crude prices to a 2.5 year-high which subsequently burdened consumers heavily. With gas prices cooling off, consumers are more confident about the economy. This is clearly reflected in the latest reading of The Thomson Reuters/University of Michigan Consumer Sentiment index, which shows that for the month of May, consumer sentiment jumped beyond analysts’ sentiments.

Consumer sentiment jumped to 74.3 in May from 69.8 in April. This came in ahead of the preliminary reading of 72.4 and also surpassed analyst expectations of a reading of 70. Also, consumer expectation was up to 69.5 in May from 61.6 in April. The reading on current economic condition topped analysts’ estimates but declined from the previous month. For May, the reading was 81.9, down from 82.5 in April and up from estimates of 80.2.

Markets were also bolstered by reports of a surge in consumer spending and personal income. The Commerce Department reported: “Personal income increased $46.1 billion, or 0.4 percent, and disposable personal income (DPI) increased $35.1 billion, or 0.3 percent, in April,” and, “Personal consumption expenditures (PCE) increased $41.5 billion, or 0.4 percent. In March, personal income increased $54.6 billion, or 0.4 percent, DPI increased $46.3 billion, or 0.4 percent, and PCE increased $54.8 billion, or 0.5 percent, based on revised estimates.” Consumer spending was up for the 10th straight month though economists had projected a higher increase in spending for April, by 0.5%. The report from the Commerce Department comes in behind a month and has therefore not taken into account the recent drop in gas prices. Therefore, lower gas prices are further expected to bolster consumer expenditure in the months ahead.

However, a report from the National Association of Realtors (NAR) said pending home sales had declined for the month of April. According to the report: “The Pending Home Sales Index, a forward-looking indicator based on contract signings, dropped 11.6 percent to 81.9 in April from a downwardly revised 92.6 in March. The index is 26.5 percent below a cyclical peak of 111.5 in April 2010 when buyers were rushing to beat the contract deadline for the home buyer tax credit.” Lawrence Yun, the chief economist of NAR said: “The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” he further added, “No doubt the continuing excessively tight mortgage underwriting process is making the housing market recovery unnecessarily slow”.

This disappointing data on home sales could not dampen the bullish sentiment of the homebuilder stocks. Among the gainers in the sector were, KB Home (NYSE:KBH), Toll Brothers Inc. (NYSE:TOL), PulteGroup, Inc. (NYSE:PHM), Lennar Corp. (NYSE:LEN) and DR Horton Inc. (NYSE:DHI) and they surged 2.6%, 1.8%, 4.3%, 2.1% and 1.4%, respectively.

The financial sector moved up and the Financial Select Sector SPDR fund was up 0.7%. Morgan Stanley (NYSE:MS), The Goldman Sachs Group, Inc. (NYSE:GS), Citigroup, Inc. (NYSE:C), Bank of America Corporation (NYSE:BAC), Wells Fargo & Company (NYSE:WFC) and U.S. Bancorp (NYSE:USB) were up 2.2%, 2.0%, 1.9%, 2.0%, 1.6% and 1.9%, respectively.

Stock Market News for May 31, 2011 – Market News

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