Dow up 128 as a late rally boosts stocks

Updated: 8:25 p.m. ET

Stocks finished May with a big late-day flourish as investors ultimately shrugged off worries about the U.S. economy and bet instead that hopes for a new solution to the Greek debt crisis might work.

The gains, however, were not strong enough to push U.S. stocks into the black for May.

The rally offset concerns about home prices. Prices fell in March to their lowest levels since the U.S. housing bubble burst in 2006, according to the Standard & Poor's Case/Shiller Hiome Price Index. The declines were driven by foreclosures, a glut of unsold homes and the reluctance or inability of many to buy.

Consumer confidence wasn't as strong as expected, and a closely watched index of manufacturing weakened substantially.

The Dow Jones industrials ($INDU) finished up 128 points, or 1%, to 12,570. An early 133-point gain faded to as little as 40 points before the late buying kicked in. The Standard & Poor's 500 Index ($INX) finished at its high of the day, adding 14 points, or 1.1%, to 1,345.

The Nasdaq Composite Index ($COMPX) saw a 31-point gain drop to 12 points, then exploded to a 38-point gain at 2,835.

You could see the market's fluctuations in Caterpillar (CAT), which was up nearly 1.9% on the Greek news after the open. The gain was nearly wiped out, but the shares recovered to $105.80, up 1.2%.  Boeing (BA) had a similar experience. Shares rose to $78.35, then fell back to $77.41. They rebounded at the close to $78.03, up 1.4%.

While the rally was welcome, the Dow ended May down 1.9%, with the S&P 500 and the Nasdaq off 1.4% and 1.3%, respectively.  The declines, while modest, were the worst for the indexes since August, and the Dow's loss was its first since November. The Dow is up 8.6% for the year, with the S&P 500 up 7% and the Nasdaq up 6.9%.

Tuesday is a big day for the market. The Institute for Supply Management will release its manufacturing index for May. Auto makers will report May sales; expect a drop for the Japanese manufacturers. And the ADP National Employment Index will offer a look at private-sector employment trends.

Commodity gains fall back slightly

The Greek euphoria, meanwhile, pushed commodity prices sharply higher, but those gains have been trimmed by the U.S. data.

Gold settled down 50 cents to $1,536.80 an ounce. Silver, however, settled up 44.2 cents to $38.305 an ounce and was higher in after-hours trading. Copper was off a penny to $4.1775 a pound.

Gold was off 1.3% for the month, its first decline since January. Silver was off 21.2%. Copper finished the month basically even. (That explains why Freeport-McMoRan Copper & Gold's (FCX) was off 0.2% to $51.64.)

Interest rates were lower, with the 10-year Treasury note yielding 3.05%, down from 3.064%. The dollar was lower against major currencies, especially the euro.

Crude oil in New York settled up $2.11 to $102.70 a barrel. It had been as high as $103.39 and was drifting lower after hours. Brent crude was up $1.87 to $116.55 a barrel in London.

The national average retail price of gasoline was $3.78 today, according to AAA's Daily Fuel Gauge Report. Since peaking on May 5 at $3.985 a gallon, the average has fallen 20.5% or 5.1%.

Six states -- Alaska, Connecticut, Hawaii, California, Illinois and New York -- plus the District of Columbia, had average prices above $4 a gallon.

Oh, that mediocre data
The day's economic data didn't cheer anyone. And it comes in a week that will end with the Labor Department's big report on unemployment and nonfarm payroll employment on Friday.

Consumer confidence dropped to 60.8 in May, according to The Conference Board’s index, after April’s reading of 66. The market had been anticipating a reading of 66.3.

Manufacturing activity in the Chicago area weakened significantly in May. Chicago's Institute for Supply Management’s purchasing managers index dropped to 56.6 in May after April’s reading of 67.6. May’s level was much weaker than the reading of 62.5 that economists had been forecasting, according to Briefing.com.
 
The S&P/Case-Shiller 20-city home price index fell 4.2% during the first quarter, putting prices back at 2002 levels. For March, the index fell 3.6%, exceeding expectations for a decline of 3.4%, according to Briefing.com. In February, the index fell 3.33%.

Nationally, S&P said, home prices are back to 2002 levels. Nineteen of the 20 markets covered by the index saw prices fall from year-ago levels. The one winner was Washington, D.C. The only markets to show gains in March over February were Washington, D.C., and Seattle.

Another aid package for Greece?
European stocks rallied strongly today as reports from The Wall Street Journal and others suggested that Germany is considering dropping plans for an early restructuring of Greece's debt, increasing the likelihood that Greece will receive a new loan package.

That will give Europe time, maybe, but the Greek situation won't go away. “The can has been given a good solid kick down the road and for a day or two or a week or so the problem has been postponed, but the problem exists nonetheless,” market watcher Dennis Gartman noted today.

The problem the Greeks have is simple. They can't service their national debt.

But to impose draconian cuts, as the European Central Bank and the International Monetary Fund are demanding, risks either a depression that won't be tolerated by the Greek people or a default on the debt and Greece's withdrawal from the European monetary union. That could start a new banking crisis all across Europe.

Over the weekend, Barron's recommended that bond holders be prepared to take a 50% writedown on their Greek bonds -- or risk worse.

It's hard to find a loser today

Today's rally was solid.

Twenty-nine of the 30 Dow stocks were higher. Pfizer (PFE) was the leader, up 2.5% to $21.45, followed by Cisco Systems (CSCO) and Alcoa (AA), up 2.1% to $16.80 and 2% to $16.81, respectively.

The laggard was McDonald's (MCD), down 0.1% to $81.54. Bank of America (BAC) was down for much of the day but finished up 0.5% at $11.75.

Meanwhile, 88 of the stocks in the Nasdaq-100 Index ($NDX.X) were higher, led by Activision-Blizzard (ATVI), up 4.7% to $11.99, and KLA-Tencor (KLAC), whose equipment monitors chip manufacturing processes. Shares were up 3.6% to $43.10.

Activision shot up on reports it will offer an online service to let users download extra content for its wildly popular "Call of Duty" games.

Apple (AAPL) was up 3.1% to $347.83. CEO Steve Jobs will address the company's annual developers conference on Monday to unveil a cloud service that lets users store content online and tout a new version of the software that runs the iPad and iPhone.

Technology, health care and financial stocks were the market leaders. But the 10 sectors of the S&P 500 were all higher.

Nokia shares get hammered

Microsoft (MSFT) closed up slightly at $25.01. Its smart-phone partner Nokia (NOK) slumped 14.4% to $7.02, after the company reported that business in its current quarter was tracking much worse than expected.

Nokia said it could no longer offer a full-year forecast, citing "multiple factors" that are "negatively impacting" its business. (Microsoft is the publisher of MSN Money.)

One of the biggest factors is that the devices using Google's Android platform are becoming very popular in Europe and Asia and taking business from the Finnish company.

Its first phone using Microsoft's operating system may ship in the fourth quarter of this year, earlier than some had expected.

Solar stocks jump as Germany vows to junk nukes
If you're a bull on oil, natural gas and solar energy, you're making money in a big way today. And you have German Chancellor Angela Merkel to thank.

Merkel announced Monday that Germany would phase out its 17 nuclear power plants by 2022. So, Europe's biggest economy will have to replace all that energy. That's great for solar. So, shares of First Solar (FSLR) were up 2.4%. LDK Solar (LDK) jumped 8.1% to $7.59.

Meanwhile, uranium shares tumbled on the German news. Cameco (CCJ), the largest uranium producer, was off 3% to $28.06. UR Energy (URG) dropped 8.3% to $1.65.