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The close: Dow rally sputters and Facebook slides

A monitor shows the value of the Facebook, Inc. stock during morning trading at the NASDAQ MarketSite in New York, May 22, 2012. Facebook's shares fell again on Tuesday, leaving them down nearly one-third from Friday's highs as questions mounted over the company's financial prospects and its ability to grow fast enough to meet the hype surrounding its stock.


Major U.S. indexes failed to maintain much upward momentum on Tuesday, a day after ending a vicious six-day losing streak – but at least Canada's benchmark index posted its biggest one-day gain in more than a month.

The Dow Jones industrial average closed at 12,502.81, down 1.67 points or 0 per cent. The broader S&P 500 closed at 1316.63, up 0.64 point or 0 per cent. In Canada, the S&P/TSX composite index closed at 11,451.78, up 171.14 points or 1.5 per cent.

The news close to home had been upbeat during the day. In particular, the U.S. housing market showed more signs of improvement after a report showed that U.S. existing home sales rose 3.4 per cent in April over March, well above the 2.7 per cent gain expected by economists. What's more, the inventory of unsold homes was down about 20 per cent from last year, to levels last seen in 2005.

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The report helped drive U.S. bank stocks higher. JPMorgan Chase & Co. rose 4.6 per cent and Bank of America Corp. rose 2.2 per cent.

However, investors remain awfully sensitive to what's going on in Europe. Some optimism about a summit of European leaders, to start on Wednesday, lifted stocks in Europe, sending Germany's DAX index up 1.7 per cent on Tuesday. On the downside, though, a report from Dow Jones suggested that Greece – still the epicentre of concerns about the euro zone – is considering making preparations to exit the euro zone, skewering this early optimism.

Meanwhile, Facebook Inc. is looking more and more like a botched initial public offering, and some fingers are now pointing at the source of the failure. The shares fell another 8.9 per cent, marking the third straight drop for the newly traded stock, taking the price to $31 – down $7 or 18.4 per cent from its starting point.

In Canada, where the stock market was closed on Monday and stocks missed out on the impressive U.S. rally, the gains were widespread. However, commodity producers looked particularly strong: Barrick Gold Corp. rose 1.5 per cent and Suncor Energy Inc. rose 3.3 per cent.

Commodity prices didn't play along. Gold fell to $1,576.60 (U.S.) an ounce, down $12.10. Crude oil fell to $91.66 a barrel, down 91 cents.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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