NEW YORK — That screeching sound you heard in May? That was the stock market.
While the month ended with four days of gains in most of the indexes, concerns that high gas prices, tornadoes and flooding in the South, the post-natural-disaster slowdown in Japan and a growing debt crisis in Europe sent the Standard & Poor’s 500 index down 1.4 percent in May.
That decline followed a 2.85 percent gain in April, which followed gains that set the fastest pace in the first quarter since 1998. Before this month, stocks were boosted by higher corporate earnings, increased business spending and a global economic expansion.
May was the first down month for the S&P since August. The bounceback comes amid speculation about additional aid for Greece.
“There’s a road map to getting Greece through its crisis,” said Madelynn Matlock at Huntington Asset Advisors in Cincinnati. “That’s why investors are reacting positively. In the U.S., we got some softening in economic data. That doesn’t tell me we’re going to have a QE3 (third round of quantitative easing by the Fed). It tells me that monetary policy is going to be easy for a while. That should provide room for stocks to move higher.”
Other risky assets also saw declines in May, following a year of increases. The prices of commodities such as oil, cattle and coffee fell by an average of 7 percent. Meanwhile, Treasury bond prices, which tend to rise when investors fear the economy is slowing, rose to near their highest level of the year.
For Tuesday, the stock market ended higher on signs that Germany might drop its demands for an early rescheduling of Greek bonds, paving the way for a deal that could prevent Greece from defaulting on its debt. The S&P gained 14.10, or 1.1 percent, to 1,345.20. The Dow Jones industrial average added 128.21, or 1 percent, to 12,569.79. And the Nasdaq composite rose 38.44, or 1.4 percent, to 2,835.30.
These gains came in spite of another grim report on the U.S. housing market. Home prices in 12 of the 20 cities tracked by the S&P/Case- Shiller index dropped in March to the lowest levels since the housing bubble popped in 2006.
“Home prices continue on their downward spiral with no relief in sight,” said David Blitzer, chairman of the index committee at S&P Indices.
Oliver Pursche, president of Gary Goldberg Financial Services, said the report didn’t hurt investors’ confidence much because their expectations for the U.S. housing market were already low.
“There’s no shock factor there,” Pursche said. “We knew it was going to be bad, and it is.”
Bloomberg News contributed to this report.
