The US stock market ended May with a boom and could have room to move even higher. Prices and trading volumes were strong, especially in the last week of the month, when investors were applauded by Americans who found ways to enjoy the Memorial Day holiday and forget about the coronavirus problems.
The increase rose by 4.53% in May, a strong increase after the index rose by 12.7% in April.
The two-month acceleration represents + 17.8%, a performance not seen since the 18.7% rise in March-April 2009 after the market bottom during the Great Recession. More importantly, perhaps, the rally that started in March 2009 will largely have taken place over the next five years.
A successful recovery now and a lengthy rally like the one in 2009 will depend on a number of factors:
The Federal Reserve continues to add more money to the banking system and keep interest rates low. (Closed Friday at 0.653%.) Central banks elsewhere promise the same.
The federal government continues to provide incentives.
In the United States, the reopening of businesses, schools, and other activities is proceeding at a reasonable rate.
Gaining control of the coronavirus pandemic. To date, more than 6 million cases have been reported worldwide with more than 372,000 deaths worldwide. There are nearly 1.8 million U.S. cases with nearly more than 104,000 deaths. A hectic race is underway to develop, test, mass-produce and mass-distribute a vaccine.
It all looks complicated. And that is it.
In addition, those terms must work between the United States and China.
In addition, this fall's US elections will almost certainly be divisive, especially after the protests and riots that erupted in the United States last weekend following the murder of Floyd George in Minneapolis last week.
Lots of Fundamental Risk, New Market Stars
Any of these issues could derail the rally with dramatic sell-offs like those that happened routinely when the Trump administration attempted to negotiate the first stage of a trade agreement with China.
On the positive side for investors, however, market effects suggest that stocks are not overvalued as in January and February. The, and (NBI) are ahead of the year and may reach new highs this week.
Market performance in May was different from the April rally that produced the best one-month gains for the S&P 500 and Dow since 1987.
In addition to the S&P 500 gains, the (INDU) added 4.26% for the month, compared to 11.1% in April. The NASDAQ Composite (NDX) was up 6.75%, compared to 15.5% the month before. The NASDAQ 100, which is dominated by large technical stocks, added 6.17%.
The April rally was heavily impacted by gains in major tech stocks, including Apple (NASDAQ :), Microsoft (NASDAQ :), Amazon (NASDAQ :), Facebook (NASDAQ :), and Netflix (NASDAQ :).
May's advance had more to do with star performance in other sectors of the market, especially biotech companies.
Biotechnology stocks rose more than 8% after investors sought to hunt a coronavirus vaccine and cures for other diseases, especially cancers.
Shares of Novavax (NASDAQ :), a small Maryland biotech, increased by 154% in hopes that the candidate for the coronavirus could be a winner. The release by Moderna (NASDAQ :), a clinical-stage biotech based in Cambridge, Massachusetts, of some early but positive results pushed inventory up to $ 87 and triggered a 912-point Dow rally.
Although the shares fell to $ 61.50, they are still up 33.7% for the month.
Also working on vaccines are major pharma groups Merck (NYSE :), Johnson & Johnson (NYSE 🙂 and Pfizer (NYSE :). Gilead Sciences (NASDAQ 🙂 shares have been volatile as studies continue to use the drug's inhibitor of drugs to treat the disease.
The (MID) and also made gains: 7.1% for the mid-cap benchmark and 6.36% for the Russell.
The shares of housing and real estate have moved on the basis of data showing that house prices remain stable in many markets. KB Home (NYSE 🙂 increased by 26% this month. PulteGroup (NYSE :), Lennar (NYSE 🙂 and DR Horton (NYSE 🙂 had similar gains.
The share of airlines declined in April, but showed signs of stabilization in May.
Alaska Airline Group (NYSE :), down nearly 44% in April, was up 5% in May. The reason: letting go of home orders means people are going to travel again. The number of passengers collapsed during the pandemic.
Boeing (NYSE 🙂 attracted some interest from investors, from those who believe that the company's order book will fill up again as the economy begins to recover. The aviation giant's shares were up 3.4% after falling 5.4% in April. Still, they are down 55% from the year.
Some winners from April saw moderate May; Oil Was Muddled
Some of the big winners from April had so-so gigs in May. For example, Amazon achieved 26.9% in April. However, in May, after reaching a 52-week high of $ 2525.45, shares fell 1.28%.
Tesla (NASDAQ 🙂 jumped 49% in April because the company reported well. But the stock rose by only 6.8% in May. The shares are still up 99.6% for the year.
Finally, crude oil prices rose significantly during the month after an almost panic in some markets in April. crude ended 88% at $ 35.49 a barrel in May. rose 42.9% to $ 37.84.
Energy supplies, on the other hand, seemed confused. Chevron (NYSE 🙂 and Exxon Mobil (NYSE 🙂 showed small losses. Apache (NYSE 🙂 was down 17.5% from a 213% rise in April. Oil services giant Halliburton (NYSE 🙂 was up 11.9%, but down 52% for the year.
The major concern now is that many small energy companies will not survive these prices.
