Key Highlights
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Market Snapshot
The S&P 500 recouped its April (-4.16%) decline and posted its 23rd new closing high of the year (5,308.15 on May 15, compared to the prior 5,254.35 high on March 28). The S&P 500’s rise was steady, as it posted five weekly gains in a row (up 6.79%), breaking above the 5,300 level (reaching 5,325.49 on May 16), as it went on to post another closing high (its 24th YTD, 5,321.41 on May 21). For the last week of the month, however, it pulled back slightly (-0.51%) on what appeared to be profit-taking (with buying coming in on the afternoon of the last day of trading, turning a 0.84% loss into a 0.80% gain for the day), as it closed May at 5,277.51, up 4.80% (it had been up 5.67% during the month), more than making up for April’s 4.16% decline, and up 10.64% YTD (0.83% away from its closing high). The Dow® also posted two new closing highs, first at 39,908.00 on May 15 and then at 40,003.59 on May 17 (its only close above 40,000; it reached 40,051.05 intraday), as it closed the month at 38,686.32, up 2.30% for the month and up 2.64% YTD.
For May, 10 of the 11 sectors increased, after 1 gaining last month and all 11 being up in March and February. Information Technology did the best, up 9.95% for the month (up 16.93% YTD and up 30.00% from the 2021 close), while Energy did the worst and was the only negative sector, down 0.97% (up 10.62% YTD and up 67.49% from the close of 2021).
The S&P 500 closed at 5,277.51 (reaching a closing high of 5,321.41), up 4.80% (4.96% with dividends) from April’s 5,035.69 close, when it was down 4.16% (-4.08%) from March’s close of 5,254.35 (3.10%, 3.22%), as the 2024 YTD return was up 10.64% (11.18%). For the three-month period, the index was up 3.56% (3.90%), as the one-year period was up 26.26% (28.17%), the 2023 return was up 24.23% (26.29%) and the 2022 return was -19.44%
(-18.11%).
For May, the S&P 500 posted 2 new closing highs, compared to none for April, 8 in March, 8 in February and 6 in January; it has set 24 new closing highs YTD, compared with none in 2023, 1 in 2022 and 70 in 2021 (the record highest, 1995, had 77). The index was up 55.86% (66.90% with dividends) from its pre-COVID-19 Feb. 19, 2020, closing high.
Target prices continued up, as the S&P 500’s one-year Street consensus target price increased for a sixth month, after declining for two consecutive months, which followed 11 consecutive months of gains (which was after nine consecutive months of declines), to 5,890, an 11.6% gain (14.5% last month) from the current price and up from last month’s 5,766 (5,655 the month before that). The Dow target price also increased for the sixth month, after two consecutive months of declines, which was after three consecutive months of gains, to USD 42,955, a 12.0% gain (13.2%) from now (42,808, 42,619).
The Biden administration announced new tariffs on USD 18 billion of goods from China, including quadruple tariffs on Chinese electric vehicles (to 100% from the current 25%) to protect U.S. manufacturers. The increase is seen as having little impact, since few electric vehicles are imported to the U.S. from China. Tariffs were also increased on medical supplies and solar supplies, as Biden extended the Section 301 Tariffs on Imports from China, which started in 2018 and covers USD 300 billion of Chinese products.
The U.S. FOMC met and as expected, left its rates unchanged. The Fed said inflation has remained higher than hoped and that this may prolong higher interest rates. The Fed also said it approved a plan to slow its USD 7.4 trillion balance sheet reduction by reinvesting maturing securities into new ones (it had been reducing its balance sheet USD 60 billion per month).
The FOMC minutes for the April 30-May 1, 2024, meeting (when it kept its interest rates unchanged at 5.25%) showed it was disappointed in the continued strength of inflation, and that it would take longer to be certain of when it would reach the 2% target. It discussed measures to curb inflation, which would not include reducing interest rates. The Fed’s Beige Book said the economy continued to slowly expand, but persistent inflation also continued, and it speculated that the economy was unlikely to further expand until inflation slowed. The Federal Bank Reserve of Cleveland nominated former Goldman Sachs (GS) executive Beth Hammack (a current voting FOMC member) to be its new president, replacing Loretta Mester, who is retiring.
The Bank of England met and, as expected, voted (7-2) to keep its interest rates unchanged at 5.25%, while it indicated a June interest rate cut, with the Street expecting a 0.25% cut in June and another 0.25% reduction in 2024. The minutes of the Royal Bank of Australia’s policy meeting (May 6-7, 2024, when it left interest rates unchanged at 4.35%) showed inflation returning under its forecast, as it discussed an interest rate increase. Preliminary Q1 2024 U.K. GDP turned positive, up 0.6% for the quarter (0.4% expected), up from the -0.3% Q4 2023 reading, as the year-over-year rate was 0.2%, up from the prior -0.2%.
