A late May rally in stocks is not yet cause for celebration for investors

If you managed to sleep through May or just avoided your brokerage app, congratulations.

You may be sitting on gains despite major averages punishing investors with heartbreaking declines of up to 10% at month lows.

Once the dust settled, the S&P 500 (^GSPC) finished slightly higher while the Dow Jones (^ DJI) gained only 13 points. The Nasdaq compound (^IXIC) lost just over 2.1% in May.

A six-day rally to end May stemmed the bleeding, but the reality is still smart. The Nasdaq Composite just posted its fourth monthly loss of the year, which it hadn’t done since 2002.

This index – along with the S&P 500 Consumer Discretionary (^SP500-25) and communication services sectors (^SP500-50) — are still down more than 20% in 2022.

The energy values ​​were once again the spotlight in Maygenerating an additional 16% for the Energy Select Sector SPDR fund (XLE). XLE is now up 57% this year thanks to the efforts of Chevron, owned by Warren Buffett (CLC) and Occidental Petroleum (OXY) – among many others.

On the retail front, consumer staples stocks are hammered, as are their discretionary cousins, with those sectors down 4.1% and 5.1% respectively this month.

These Walmarts (WMT) and Target (TGT) revenues that led to their biggest beating since the crash of 1987? Those losses stung, with Walmart down 16% for the month of May and Target down 29%. And some small names in the sector have fared less well, with Abercrombie & Fitch (ANF) losing 41% and Bed Bath & Beyond (BBBY) plummeting by 37%.

A bright spot in May was the semiconductor industry.

These stocks largely avoided the hammering suffered by most of the market and used the latest rally to recoup losses from the start of the month and then some.

Most of the chip names (yellow, below) closed in the green in May, although they all sat on losses – some substantial – for the year.

NVIDIA (NVDA) is the worst off in the basket, down 37% since the start of the year. Advanced micro-systems (AMD) gained 19% in May but is still down 29% in 2022. Manufacturers and analog IC manufacturers are worst off this year — Texas Instruments (TXN), Analog Devices (ADI) and GlobalFoundries (SFP) are all down less than 10% in 2022.

Contrast this performance with some of the disasters in the software space where cloud computing and cybersecurity companies continue to take a beating.

Okta (OKTA), Zscaler(SZ) and Snowflake (SNOW) each lost a quarter of their value in May alone and are each down 50% or worse this year. Game companies are doing better than most, with Activision Blizzard (ATVI) up 3.0% in May and 17% over the year. Electronic Arts (EA) reflects these returns – up 17% on the month and down 5.0% on the year.

But let’s not forget that many of these software-related names fared just as badly as many names after the bursting of the tech bubble of the 1990s.

As these names have become cheap, some have been scooped up by investors in M&A deals, including Broadcom (AVGO) switch to buy VMWare (vmw) in what would be one of biggest tech deals of all time.

A flat month and a robust recovery to top it off doesn’t exactly change the character of this market, however.

Mother Market is an expert in controlling the fear of greed. Greedy bulls and look alike can both be punished in a trendless, directionless market. “If they don’t scare you, they wear you out,” Brian Shannon tells AlphaTrends.net.

So far in 2022, the longest rally of the year lasted around two weeks in March. If the current bounce materializes into something more, it’s worth remembering that many Wall Street traders and analysts were calling for a capitulation or a slump to new lows. It hasn’t happened yet, and it doesn’t even have to.

As June begins, we officially enter the summer slump, during which many traders head to the beach, leaving an already illiquid market a little more illiquid.

Instead of “sell in May and walk away”, perhaps the new market mantra should be “hedge in May and walk away”.

Jared Blikre is a markets reporter on Yahoo Finance Live. follow him @SPYJared.

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