Market Watch: June 2, 2009

Stocks made modest gains Tuesday for the fourth day running, fueled by a report of a big jump in pending home sales.

The report showed April producing the biggest increase in pending home sales in almost eight years, good news for the floundering housing market.

However, overall stock gains were modest, due to an announcement from several big banks that they will sell more stock to repay the federal bailout money.

Some experts are questioning whether the rally can last.

"The economy has to recover nicely to justify the recent run-up and I don't know whether it's got that much momentum in it," said William Rutherford, president of Rutherford Investment Management LLC, in an Associated Press article.

The Dow Jones industrial average gained 19.43 points (0.2 percent), to 8,740.87. The Standard & Poor's 500 index rose 1.87 (0.2 percent), to 944.74. The Nasdaq composite index rose 8.12 (0.4 percent), to 1,836.80.

The stocks of several banks lost value on an announcement that they would sell additional shares to pay back bailout funds. Increasing the number of shares will decrease the value of existing shares.

Following similar announcements by JPMorgan Chase & Co. and American Express Co. on Monday, Morgan Stanley said it will offer $2.2 billion in new stocks. JPMorgan will sell $5 billion in common stock, while American Express will sell $500 million.

JPMorgan slid $1.61 (4.5 percent) to $34.50, while American Express fell $1.28 (4.9 percent) to $24.71. However, Morgan Stanley added 20 cents, to rest at $30.09.

Stock indicators are up overall, as investors are heartened by data suggesting the economy is slowly recovering. Despite GM's bankruptcy announcement on Monday, the stocks saw an enormous rally on Monday.

Home builders' stocks rose on the report of increased pending home sales. Toll Brothers Inc. increased by 73 cents, or 3.9 percent, to $19.53, while Beazer Homes USA Inc. gained 24 cents, or 9.1 percent, to $2.87.

The Russell 2000 index of smaller companies gained 5.30, or 1 percent, to 526.63.

After it hit its highest level of the year Monday, light, sweet crude fell 3 cents Tuesday to $68.55 on the New York Mercantile Exchange.

Coming up later this week: investors are looking toward several important economic reports, especially the monthly jobs data on Friday. These will affect where the market goes next, so stay tuned.

In overseas indexes, Britain's FTSE 100 dropped 0.7 percent, Germany's DAX inched up less than 0.1 percent, France's CAC-40 fell less than 0.1 percent, and Japan's Nikkei stock average gained 0.3 percent.

Reference: The Associated Press