Today: Consumer confidence, housing prices hit multiyear highs, providing evidence for Federal Reserve's contention of strengthening economy. Also: Oracle (ORCL) pairs up with another former enemy, Salesforce, and Apple's (AAPL) downturn calms despite more negative appraisals.
The lead: Economic reports paint picture of strength, boosting Fed's case
Economic reports issued Tuesday showed consumer confidence at a five-year high and home prices reaching their highest point in seven years, along with other bright notes for the U.S. economy, backing up the Federal Reserve's contention that the U.S. economy is improving at a stronger rate.
Fed chief Ben Bernanke said last week that the central bank may begin to pull back on its $85 billion monthly bond purchases because of the strengthening economy, which spooked investors and sent markets spiraling down. With Tuesday's data in hand, however, economists said the Fed had been right, and Wall Street headed back in a positive direction.
"The economy is leaning forward and the data underscore that it is time for the Fed to begin to move away from expanding its balance sheet," Steve Blitz, chief economist at ITG Investment Research, told Reuters.
The housing numbers were especially savored, amid concerns that the Fed's move could raise interest rates, choking off the housing market's turnaround. The Standard & Poor's/Case Schiller index, which monitors home prices in 20 large metropolitan areas across the United States, reported that April showed the highest year-over-year increases since March 2006. San Francisco led the index's gains, one of four areas to experience growth of more than 20 percent from last April.
Adding to the real estate optimism, newly constructed homes are experiencing their best sales in more than five years, with prices for new construction also rising.
"The housing recovery is alive and well and has a long way to go, and higher rates aren't going to choke it off," Joe LaVorgna, chief U.S. economist at Deutsche Bank, told Bloomberg News. "It's given the economy, or will give the economy, a lot of oomph."
Americans are obviously feeling the change, as consumer confidence hit its highest level since early in the Great Recession, January 2008, according to the Conference Board's monthly report. Consumer spending has helped keep the U.S. economy afloat, so booming confidence indicates that further spending is on its way, which would continue the strengthening trend in the second half of the year.
"The pace of growth is unlikely to slow in the short term, and may even moderately pick up," Lynn Franco, director of economic indicators at the Conference Board, told the Associated Press.
Consumers aren't shouldering the load alone, however: Businesses are picking up spending, the Commerce Department reported, with durable-goods orders rising 3.6 percent for the second consecutive month. Within that increase was a 1.1 percent rise in non-defense capital goods orders, not including aircraft orders, which is seen as a sign of plans by businesses to investments.
"It signals increased confidence among the business community about the sustainability of the economic recovery, which could itself become self-fulfilling," Millan Mulraine, a senior economist at TD Securities, told Reuters.
Taken together, the signs point to an economy that can shoulder the whims of investors, Wells Fargo economist Mark Vitner told AP.
"The economy is strong enough now that it can handle a couple of rough days on Wall Street," he said.
SV150 market report: Oracle and Salesforce squash beef, Apple trades flat
All three major U.S. stock indexes shot higher on the back of Tuesday's strong economic reports, but Silicon Valley tech stocks lagged behind a bit, gaining 0.5 percent while the big boys gained 0.7 percent to 1 percent, as Oracle and Apple struggled for gains.
Oracle dropped 0.7 percent to $29.96 despite announcing its second groundbreaking partnership in two days, signing on for a relationship with former archrival Salesforce. Salesforce founder and CEO Marc Benioff came from Oracle and established his San Francisco cloud-software pioneer with help from Oracle founder and CEO Larry Ellison, but the two had a very public falling-out in 2011 and relations have been frosty since. The two put the past behind them on Tuesday, however, announcing a joint effort that will last nine years and commit Salesforce to using Oracle hardware and other products, while Oracle will integrate Salesforce offerings with some of its own.
Customers, Ellison said, "expect application integrations to work right out of the box -- even when the applications are from different vendors. That's why Marc and I believe it's important that our two companies work together to make it happen."
Oracle announced a partnership that will allow its software to work within Microsoft's cloud offering Monday, and is expected to announce a similar deal with San Mateo-based NetSuite later this week, while trying to improve its outlook after two consecutive poor earnings reports. Tuesday's announcement seemed to do more for Salesforce, however, which gained 1.3 percent to $37.44 as Oracle fell.
Another struggling Silicon Valley giant, Apple, managed to come back from early declines to post a flat day of trading despite more negativity from analysts. Apple shares fell lower than $400 Monday for the first time since April, then repeated that feat Tuesday before closing with a negligible nine-cent gain at $402.63. Oppenheimer analyst Ittai Kidron pulled his price target down for the Cupertino tech giant's shares, piling onto Monday's negativity from analysts with a note that suggested demand for the cheaper iPhone 4 and iPhone 4S models could hurt Apple's revenues.
There were successes in Silicon Valley trading Tuesday: Yahoo (YHOO) increased 3.7 percent to $24.95 as CEO Marissa Mayer oversaw her first annual shareholders meeting, telling investors that the Sunnyvale company's new products will help turn the stock around. San Jose-based eBay (EBAY) gained 1.6 percent to $51.64 while discussing its new search technology, and Intel (INTC) moved 1.3 percent higher to $23.88 as CNET reported that the Santa Clara shipmaker is getting closer to rolling out its television offering. Oakland-based Pandora experienced a big 8.5 percent bump to $16.41 after disclosing that it is now reaching 2.5 million listeners through their cars, and Facebook moved 1.3 percent higher after an AT&T executive disclosed that it had managed to sell out of the HTC First, the so-called Facebook Phone that was the first to come with the company's Home Android app preinstalled.
On the negative side, Google (GOOG) declined 0.4 percent to $866.20 after a positive court result in Europe but yet more agitation involving its European Union antitrust case; and Netflix (NFLX) dropped 1.3 percent to $212.90 while announcing another original production, as Bernstein Research cut its rating and price target for the company.
Up: SolarCity, Pandora, Zynga, SunPower (SPWRA), Yahoo, Advanced Micro Devices, Intuit (INTU), LinkedIn, Applied Materials, Hewlett-Packard (HPQ), Adobe (ADBE), Gilead, eBay, Facebook, Intel, Tesla, Electronic Arts
The SV150 index of Silicon Valley's largest tech companies: Up 6.31, or 0.53 percent, to 1,207.76
The tech-heavy Nasdaq composite index: Up 27.13, or 0.82 percent, to 3,347.89
The blue chip Dow Jones industrial average: Up 100.75, or 0.69 percent, to 14,760.31
And the widely watched Standard & Poor's 500 index: Up 14.94, or 0.95 percent, to 1,588.03
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.