On Tuesday, oil prices fell, the euro sank to a 22-month low, and the yield on the U.S. government's 10-year Treasury note fell near a historic low after a report suggested that Spain will have more trouble repaying its debts.
But stocks rose anyway. In fact, they had one of their best days in an otherwise dreary month. Investors focused on hopes that China is poised to rev up its economic growth machine, and that the upcoming elections in Greece will turn out to be favorable for the euro zone.
"The overriding news isn't that great," said Robert Pavlik, chief market strategist at investment advisors Banyan Partners. "But Greece and China are taking the pressure off the market in the short term."
Industrial stocks that depend heavily on the Chinese economy, like Caterpillar and Alcoa, rose sharply, bringing the Dow Jones industrial average up 110 points to 12,565 in mid-afternoon trading. China is the largest market for aluminum, which Alcoa makes, and Caterpillar recently said it is aggressively courting China to sell its construction equipment.
If the Dow finishes higher it will be only its fifth gain this month. The Dow is still down 5 percent for May and is headed for its first monthly loss since September. The increasing likelihood that Greece will drop out of the euro currency and a worsening of Spain's financial condition have been the main culprits behind the decline.
Facebook's stock plunged 9 percent to $28.92, shaving off $25 billion of the company's market value in the first seven days of trading. The glitch-plagued IPO has drawn scrutiny from regulators and ire from disgruntled investors who had trouble executing trades.
The Standard & Poor's 500 index rose 12 points to 1,329 and the Nasdaq composite rose 28 points to 2,866.
U.S. markets were closed Monday for Memorial Day.
Oil prices fell below $91 after ratings agency Egan Jones downgraded Spain's debt Tuesday. Crude oil prices have been dropping steadily from $106 four weeks ago amid signs of slowing global growth.
Analysts have been concerned that Spain and other weak European economies could drag the European Union into recession this year. That would not only impact Europe, a region that consumes 16 percent of the world's oil. It also could harm trading partners like the U.S. and China and slow down global demand for oil.
The same worries flagged in the report sent the euro to $1.246, its lowest point against the dollar since July 2010. Investors fled to the safety of U.S. government bonds, sending the yield on benchmark 10-year Treasury note as low as 1.71 percent, near an all-time low.
Stock investors also appeared relieved with news from Greece that a party in favor of abiding by the terms of the country's financial rescue could win in national elections next month. That could avoid a catastrophic rift with Greece's international creditors and keep the struggling country within the euro zone.
There was some positive news from the beleaguered U.S. housing market. The Standard & Poor's/Case-Shiller report on home prices found that prices increased in 12 of the 20 cities it tracks. The increase in March from the month before was the first in seven months. It was the latest evidence of a slow recovery taking shape in the troubled housing market.
In Europe, concerns that Spain's ailing banking sector might worsen the European debt crisis sent the Spanish stock market to nine-year lows. Other European markets rose.
Spain's banks are sitting on huge amounts of soured investments in the country's imploded real estate market. That has led to the recent nationalization of Bankia, the country's fourth-largest lender. Bankia revealed last week that it needs far more money in state aid than previously expected, $23.8 billion.
Madrid's Ibex index fell 2.3 percent. Bankia dropped another 13.6 percent. The yield on the benchmark 10-year government bonds, a key gauge of investor confidence in the country's ability to avoid bankruptcy, was slightly lower at 6.41 percent. The rate is perilously close to the 7 percent rate, which is widely seen as too high for a country to afford over the long term.
Energy companies were also gaining on expectations that China will need more energy to fuel its growth. Peabody Energy and Chesapeake Energy shot up 4 percent, and Consol Energy gained 2 percent.
Other stocks that were making big moves:
— Interline Brands shot up 40 percent after the maintenance company said it is being acquired by a pair of private equity groups for about $811 million.
— Patriot Coal rose 5 percent after the company said its CEO is leaving the company. Last week Patriot announced that it is working with private equity firm The Blackstone Group after there were concerns that the mining company could run short on cash.
— ConocoPhillips rose 2 percent after a Citi analyst said the company is likely to pay hefty dividends this year thanks to asset sales that generated higher returns than analysts expected.