Stocks Advance, Led by Materials, Energy

Stocks rallied back after paring gains in quiet trading before the Memorial Day holiday following mixed economic news on consumer sentiment and home sales.

The Dow Jones Industrial Average rose more than 60 points after ending modestly higherin a choppy session on Thursday.

Most Dow components gained, with JPMorgan and Bank of America among those leading the pack.

TheS&P 500 and the Nasdaq also rose. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 16.

Most key S&P 500 sectors gained, led by materials, financials and energy.

The modest bounce higher in stocks today, and over the last few days, reflects the fact the market "got surprisingly oversold very quickly," said Doug Godine, head of institutional sales and trading at Signal Hill Capital. "We're just starting to see a snapback rally off those low numbers."

Going forward, Godine remains cautiously optimistic. "For every economic data point or earnings data point I feel like you are getting two good for one bad, and I’ll take that right now," he said.

As long as corporate balance sheet remain strong, and continue to demonstrate earnings growth, which he thinks they will, "that will be enough to keep this dribble of money off the sidelines and coming into equities," Godine added. "We haven’t hit the tipping point where it becomes a flood. But it's a very solid position for the equity markets to be in."

Still, while May was a bad month for stocks, June may be worse, if you consider history, according to Dan Greenhaus, chief economic strategist at Miller Tabak. "Dating back to the secular bear market’s beginning, June has been flat or down 73 percent of the time," Greenhaus wrote in a note to clients.

In earnings news, Marvel Technology jumped despite an unexpectedly big drop in profits as the the semiconductor firm gave a surprisingly upbeat outlook.

But OmniVision sank on disappointing guidance despite a jump in fourth-quarter profits and margins for the chip designer, which makes products for the iPhone.

Medco Health Solutions sank after news that Blue Cross Blue Shield will moveits mail order and specialty pharmacy benefit coverage for the Federal Employee Program from the health care company, which specializes in pharmacy services.

Elsewhere, eBay and PayPal are suing Googleover trade secrets.

Gold advanced as a report said Chinese imports were likely to surge, heating up the debate between bulls and bears.

Treasurys' yields fell as buyers rushed in, spooked by Europe's debt crisis and by the prospect of a weaker than expected U.S. economy. Now buyers of U.S. bonds bank on growth stalling, analysts told

On the U.S economic front, pending home sales fell 11.6 percent in April from March and 26.5 percent from a year earlier, the National Association of Realtors said.

But a final reading on consumer sentiment rose to 74.3, up from 69.8 the month before and better than the 72.4 initially reported by Thomson Reuters/University of Michigan. Economists surveyed by Reuters had expected the index to be unchanged.

Also, personal income and personal spending each rose 0.4 percent in April, the Commerce Department reported. Personal income had been up 0.4 percent in March, and April's gain was expected, while spending was up less than expected in April, after rising 0.5 percent in March.

The rise in stocks also comes even amid news that Greek political leaders failed to come to an agreement on how to resolve the debt crisis gripping the country, according to sources, Reuters reported.

The dollar fell against the euro and a basket of currencieseven as debt concerns in the euro zone remained troublesome.

In Europe, rising metal prices pushed mining companies' shares higher, while a report that European banks might be able to avoid higher capital rules imposed by Basel III helped bank stocks.

On Tap Next Week:

MONDAY: Memorial Day—All Markets Closed.
TUESDAY: S&P Case-Shiller Home Price Index, Chicago PMI, consumer confidence, farm prices.
WEDNESDAY: Mortgage applications, Challenger job-cut report, ADP employment report, ISM manufacturing index, construction spending, auto sales; D9: All Things Digital Conference.
THURSDAY: Chain store sales, jobless claims, factory orders, natural gas inventories, oil inventories, money supply.
FRIDAY: Non-farm payroll report, ISM non-manufacturing index; Wal-Mart shareholder meeting.

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