Stocks advance as housing report tempers economic concern

Stocks were slightly higher on Tuesday as investors looked favorably on a positive report about home prices.

The Dow Jones Industrial Average gained 32.01 points to 12,534.67. The Nasdaq Composite Index rose 17.89 points to 2,854.06, and the S&P 500 Stock Index added 6.27 points to 1,319.99.

The Case-Shiller index of home prices rose by 1.3 percent in April, the first increase in seven months. The report tracks price trends in 20 metropolitan areas, including San Diego, where prices were up 1.4 percent.

However, the Conference Board said its consumer confidence index dropped this month on concerns from U.S. households about the slowing recovery in employment. The level of confidence has dropped back to January levels.

Commodities were mixed. Gold fell $13.50 to $1,574.90 an ounce while oil was up 15 cents to $79.36 a barrel.

News Corp. (Nasdaq: NWSA) rose 8.3 percent as Rupert Murdoch’s company said it’s considering splitting into two publicly held corporations. Apollo Group Inc. (Nasdaq: APOL), the largest U.S. for-profit college chain, surged 10 percent after beating earnings and revenue estimates and raising its forecast. A measure of homebuilders in Standard & Poor’s indexes jumped 3.8 percent as housing prices dropped at the slowest pace in more than a year.

“There are lots of variables at play,” said Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “People are looking at signs of stabilization in the housing market, there’s the European summit this week, it’s almost quarter-end. It’s going to be a volatile week.”

Tuesday’s rally trimmed this quarter’s decline in the S&P 500 to 6.3 percent. The benchmark measure is on pace for the first quarterly slump since September amid concern about a global economic slowdown. Energy, financial and technology shares have had the biggest losses so far in the second quarter, tumbling at least 9.5 percent.

Consumer discretionary, energy and financial shares had the biggest gains among the 10 main S&P 500 industries. Homebuilders in S&P indexes advanced, with PulteGroup Inc. (NYSE: PHM) and Lennar Corp. (NYSE: LEN) adding more than 3 percent.

JPMorgan Chase & Co. (NYSE: JPM) had its recommendation raised, and Morgan Stanley (NYSE: MS) was lowered by analysts at Goldman Sachs Group Inc. (NYSE: GS), who said they have a better view of the near-term earnings outlook for JPMorgan. Shares of JPMorgan increased 1.1 percent to $35.71, while Morgan Stanley added 0.2 percent to $13.51.

Goldman Sachs upgraded JPMorgan to "buy" on its “Americas conviction list” of highly recommended stocks, while Morgan Stanley was removed from that list and lowered to "neutral," the analysts wrote in a research note Tuesday.

“Both JPM and MS shares have underperformed the broader banking group this year, driven by real but different idiosyncratic concerns,” Goldman Sachs analysts led by Richard Ramsden wrote. The balance of risk and potential return is better for JPMorgan shareholders, according to the note, because of “more near-term earnings and return visibility for JPM.”

Facebook Inc. (Nasdaq: FB), facing criticism for a lack of diversity on its board, appointed Chief Operating Officer Sheryl Sandberg as its first female director. The world’s largest social networking service, a majority of whose users are women, will benefit from the addition of a female voice to its board, said Laura Martin, an analyst at Needham & Co.

“This is a great move,” said Martin, who doesn’t own shares and rates the stock "buy." “Academic research shows that the greater the diversity on a board, the higher the returns to shareholders are.”

The shares rose 3.2 percent to $33.10.

Dow Chemical Co. (NYSE: DOW) slid 2.9 percent to $31.32. The largest U.S. chemical company by revenue was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Jeffrey Zekauskas. The 18-month share-price estimate is $36.

The S&P 500, down 7.4 percent through Monday since reaching a four-year high in April, is about to lose another pillar of support: the election-year calendar.

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