Stocks close higher amid euro zone fears

By msnbc.com news services

Stocks closed Tuesday higher, recovering some ground from last week's sharp selloff as investor angst about the euro zone's fiscal crisis was offset by data showing the U.S. economy's services sector grew slightly faster than expected in May.

The Dow Jones industrial average snapped a four-day losing streak. Financial stocks ranked among the best performers.

But the technical rebound was expected to be temporary and weak as market sentiment remained bearish in the face of the euro zone's debt crisis as well as a slew of economic data recently that showed the world's largest economy is experiencing slower-than-expected growth.

The pace of growth in the U.S. services sector picked up in May as a gauge of new orders improved, according to an industry report released on Tuesday. The Institute for Supply Management's services index edged up to 53.7 in May from 53.5 in April, a touch above economists' forecast for it to hold steady.

The ISM data let investors breathe a brief sigh of relief from recent economic reports, which coupled with concerns about the euro zone, drove the S&P 500 down more than 6 percent for May.

"Banging around here, flat to down, flat to up -- it feels like a little bit of a home run, to be honest," said Mark Lehmann, director of equities at JMP Securities in San Francisco.

"The facts are telling you what we all know. There are a lot of places where there is weakness in our economy and others. With most things financially related, confidence is the game ... and if you can restore confidence, things get better quickly."

Last Friday, the three major U.S. stock indexes slid more than 2 percent and the Dow industrials turned negative for the year after U.S. data showed much weaker-than-expected growth in nonfarm payrolls in May.

Spain's Treasury Minister Cristobal Montoro said the nation's high borrowing costs has effectively shut the euro zone's fourth-largest economy out of the bond market and the European Union should help Madrid recapitalize its debt-laden banks.

Statements on the outcome of emergency talks among the Group of Seven industrialized nations as they tackle the euro zone's deepening crisis offered little clarity to investors. The Treasury Department said G7 finance ministers "reviewed developments in the global economy and financial markets and the policy response under consideration.

Japan's finance minister said he told G7 members that Japan is confident in Europe's response to its problems, but indicated Tokyo was prepared to intervene in order to curb its currency.

In the euro zone, most major economies are now in various states of decline, according to business surveys that suggested even Germany is no longer immune to the crisis.

Reuters contributed to this report.

Discussing whether the recent weakness in stocks is something to be bought or to be avoided, with Lee Munson, Portfolio Asset Management; Nathan Bachrach, The Financial Network Group CEO; and CNBC's Courtney Reagan.

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