05|03|2022

Sell in May & Go Away? | April 29, 2022

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS: S&P 500, NASDAQ, CPI, PPI, Oil, Retail Sales, Sentiment
  

Markets lost ground for the second week. Does this say more about the last two weeks or the week ahead?

Monday                       S&P 500 0.11% | NASDAQ 0.41%

Markets opened the week in a muted tone. There was very little movement as Consumer Price Index (CPI) data was awaited on Tuesday.

Tuesday                        S&P 500 1.12% | NASDAQ 1.54%

CPI data for February showed inflation inching up slightly. Markets opened in the red on the news, but an earnings beat by Oracle allowed equities to march higher.

Wednesday                 S&P 500 0.19% | NASDAQ 0.54%

Crude oil inventories fell when a surplus was expected, which will further support higher prices for energy. Interest rates climbed on the back of the higher than expected CPI data from Tuesday. Growth stocks lagged as the data implies the Federal Reserve Board (FRB) will be less likely to cut rates.

Thursday                     S&P 500 0.29% | NASDAQ 0.30%

The Producer Price Index (PPI), a wholesale inflation gauge, rose in February to 1.6%. Retail sales advanced less than expected and initial jobless claims remained benign. A strong jobs market with firming inflation does not bode well for future rate cuts. Markets sold on the news, though not aggressively, as hope remains for FRB rate cuts later in the year.

Friday                          S&P 500 0.65% | NASDAQ 0.96%

Consumer sentiment is projected to fall to 76.5 in March from 76.9 in February. While lower, February and March are the first readings in the 70’s since August of last year. The week closed out on a sour note as commodity prices rise with inflation data. Further concerns mount that the inflation fight may have longer to go before a rate cut.

Conclusion                  S&P 500 0.13% | NASDAQ 0.70%

This is the first back-to-back losing weeks for the market in 2024. This leads to an FRB meeting week where guidance about potential future rate cuts will be hotly watched. Not only is the FRB meeting next week, but there is very little in the way of economic data for the week. This puts all the more focus on the FRB. 

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Markets retreated throughout April. Should we expect ‘Sell in May & Go Away’ or is there a reason for hope?

Monday                            S&P 500 0.02% | NASDAQ 0.14%

The trading week opened deep in the red. The week was expected to be weak as technology companies were reporting. The equity markets climbed throughout the day, but it was not enough to end in the green. Interestingly, the 10-year treasury retreated, lending to the climb in equity prices throughout the day.

Tuesday                            S&P 500 2.84% | NASDAQ 3.95%

Markets pushed lower curtesy of technology stocks. Safe haven bonds caught a bid on the day as interest rates fell in response to the broad equity sell-off. Markets are now near their lows from early March.

Wednesday                      S&P 500 0.21% | NASDAQ 0.01%

Equities attempted to gain on the day, but their momentum faded late in the day. Facebook was set to report earnings after hours and concerns may have caused late selling. The 10-year treasury rose 0.1% on the day (rates and price move in opposite directions).

Thursday                          S&P 500 2.47% | NASDAQ 3.06%

In a major course reversal of recent sessions, markets rose substantially on Thursday. The move came in spite of a surprise contraction in the US economy. GDP was expected to rise 1% and actually fell 1.4%. The market turn may have come as a weaker economy creates less reason for the Federal Reserve Bank (FRB) to be aggressive. The 10-year treasury remained fairly unchanged, which is the bond markets way of saying, not so fast. This indicates FRB moves should remain as previously expected.

Friday                               S&P 500 3.67% | NASDAQ 4.17%

Whelp, that was short lived. The rally from Thursday was completely erased on Friday as markets tumbled right from the open. Amazon earnings disappointed sourly and served up a sell off on Friday. AMZN alone fell over 14% on the day.

Conclusion                       S&P 500 3.27% | NASDAQ 3.93%

Markets successfully swept the month of April. All four weeks were down. The month opened with FRB minutes announcing quantitative tightening and markets did not need much else to start the retreat. One out of every five years (on average) we get a ‘Sell in May and Go Away’ where markets retreat. Could this be inverted as the first four months only saw one month of gains? Friday’s rout of markets may be reason to think so. The S&P and NASDAQ have revisited their February lows and Friday’s sell-off was broad and extended. Generally, that is the type of sell-off that sets a floor. Of course, the FRB meeting on the 4th could change all that. Some hope exists for a more dovish Fed given the lower GDP and softening core PCE (Inflation).

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Your interest in our articles helps us reach more people.  To show your appreciation for this post, please “like” the article on one of the links below:

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.