Stocks Surge as Greece Bailout Talk Outweighs Poor Data

NEW YORK (TheStreet) -- Stocks rose more than 1% on Tuesday as hopes that European officials should be able to work out a new plan to bail out Greece offset disappointing domestic economic data.

The Dow Jones Industrial Average gained 128 points, or 1%, to close at 12,569, settling just below a session high of 12,574. The S&P 500 rose 14 points, or 1.1%, to finish at 1345, and the Nasdaq Composite jumped 38 points, or 1.4% to close at 2835.

The major U.S. equity indexes still finished lower for the month of May, however, as concerns that the economic recovery is losing momentum took hold. The Dow shed close to 2%, while the S&P 500 and the Nasdaq lost 1.3 % each.

Stocks got a lift on Tuesday from a Wall Street Journal report that said Germany is considering dropping plans for an early restructuring of Greece's debt, increasing the likelihood that Greece would receive a new loan package.

The euro was up 0.6% against the dollar, which fell 0.3%, according to the dollar index.

The FTSE in London rose 0.8%, and the DAX in Frankfurt jumped 1.8%. Japan's Nikkei advanced 2%, and Hong Kong's Hang Seng jumped 2.2%.

The economic news on the domestic front, however, was poor across the board. The S&P/Case-Shiller 20-city home price index for March fell 3.6% on a seasonally adjusted basis, exceeding expectations for a decline of 3.4%, according to Briefing.com. In February, the index fell 3.33%.

Manufacturing activity in the Chicago area weakened significantly in May. According to 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.

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

"Real personal income has languished in recent quarters and the housing market appears to be in the midst of a double-dip," said Jim Baird, chief investment strategist for Plante Moran Financial Advisors, in a research note. "With food and fuel costs pinching consumers discretionary spending, it cannot be a surprise that the collective consumer mood remains challenged."

"While conditions have improved considerably in the past two years, the sub-par rate of growth and the growing sense that even the current sluggish expansion could be challenged in the months ahead has created a sense of unease that won't be easily overcome," Baird said.