Stocks Ease Out of Winning Week

Still, retail stocks tripped on the news. The S&P Retail Index dropped 1.1%, and the Dow Jones U.S. Retail Index lost 0.8%.

Another key story was the data on housing starts, which surprisingly jumped in April. The Commerce Department said the number of homes on which construction began last month climbed to an annualized rate of 1.032 million from an upwardly revised reading of 954,000 in the prior month. Economists were looking for a drop to 940,000.

"The main reason forecasters missed the April figure was a big increase in starts for multifamily homes," wrote Tony Crescenzi, chief bond market strategist with Miller Tabak and a contributor to RealMoney.com, a sister site to TheStreet.com. He pointed out that this figure is normally erratic.

Gault said the volatility of that number rendered a false uptick. "Don't read much into that," he said. "It's still doubtful we're at the bottom."

Crescenzi added that, excluding January 1991, single-family home starts were at their lowest level since 1982. "This is good news, as it will help to clear the massive overhang of unsold homes by limiting the amount of new homes put into the housing stock," he said.

Also, the number of building permits issued rose by 46,000 in April to 978,000, compared with consensus estimate for a decrease to 912,000.

The other big news was taking place in the oil market, where crude oil reached $127.82 a barrel, its highest level ever. Futures settled up $2.17 to $126.29. As usual, AAA reported another all-time high for gas prices at the pump, as the nationwide average hit $3.787.