Housing market stabilization helps stock market rally

NEW YORK — Stocks rose Tuesday, after the first weekly gain since April in the Standard & Poor’s 500, amid data showing stabilization in the housing market and after Greek opinion polls eased concern the country will leave the euro.

The S&P 500 advanced 14.60 points, or 1.1%, to 1332.42. The benchmark gauge for U.S. stocks gained 1.7% last week. The Dow Jones industrial average gained 125.86 points, or 1.0%, to 12,580.69. The Nasdaq composite rose 33.46 points, or 1.2%, to 2870.99.

“We’re definitely seeing signs of stabilization on the housing front,” says Brad Sorensen, director of market and sector analysis at Charles Schwab. “The economy is looking decent. There’s also a bit of relief that we won’t have any imminent kicking out or defaulting of Greece.”

The stock market rallied as home values in many U.S. cities fell in the 12 months ended March at the slowest pace in more than a year. Greece’s New Democracy, which supports the austerity plan negotiated with international lenders, placed first in all six polls published on May 26 as campaigning continued for June’s election. The U.S. market was closed Monday for Memorial Day.

Tuesday’s rally trimmed this month’s slump in the S&P 500 to 4.7%. The benchmark gauge is heading for its biggest monthly retreat since September, amid concern that global economic growth is slowing and that Greece may leave the euro area.

Stock buybacks are falling to a three-year low just as CEOs boost spending on plants and equipment to a record. Companies announced $1.1 billion of repurchases a day on average during the earnings season in April and May, the lowest since mid-2009, according to data compiled by Bloomberg and TrimTabs Investment Research. Capital spending in the U.S. has risen since 2010 and reached $63.6 billion in March. Devon Energy eliminated buybacks and boosted exploration and production spending. UPS cut repurchases to buy TNT Express.

After the biggest first-quarter gain for the S&P 500 since 1998, bears say the drop in buybacks removes key support for stocks amid Europe’s debt crisis and a weakening U.S. recovery.

While orders for capital equipment fell last month, bulls say the two-year gain in business investment shows CEOs are more optimistic, spending to raise profits instead of reducing stock to boost per-share earnings. “Investors and corporations themselves are best served when the cash is applied to improving capital investment, as opposed to buying stock back,” says Bruce Bittles, chief investment strategist at Robert W. Baird.