Trading was as slow as expected on this Friday before the Memorial Day weekend, but stocks still finished higher for the session and for the whole week. The month of May was a bit more mixed, however, as tech names and other growth stocks came under pressure amid concerns of rising inflation.
The major indices dipped sharply late in the session as investors tend to get a little nervous ahead of long weekends, but the Dow still ended higher by 0.19% (or nearly 65 points) to 34,529.45. The S&P advanced 0.08% to 4204.11. These indices increased 0.9% and 1.2% this week, respectively, ending back-to-back losing weeks.
The NASDAQ was up 0.09% (or more than 12 points) to 13,748.74 for the best weekly improvement of 2%.
Despite low volume out there, we received a decent amount of economic data on Friday. The most noteworthy was probably the core personal consumption expenditures (CPE) index, which jumped 3.1% in April. This inflation indicator was the highest its been in nearly three decades and above expectations. However, skittish investors were fearing much worse, so it didn’t have much of an impact.
We also got some other mostly in-line data. Personal income dropped 13.1% in April, which was actually better than expected and compares with a stimulus-enhanced surge in March. Similarly, personal spending gained 0.5% as expected compared to a nearly 5% increase in the previous month.
If there are no more surprises, May 2021 could go down as the month when we finally got the pandemic under control. Investors are certainly optimistic with the vaccine rollout and re-opening economy. In fact, they’ve moved on to worry about how the Fed will react to rising inflation and a hot market. These concerns were reflected in the month’s totals.
The Dow gained 1.9% in May as recovery names got a lot more attention in the improving environment, while the S&P mustered a 0.5% advance. But despite a strong weekly performance to end the month, the NASDAQ was under pressure most of the time and finished May lower by 1.6%.
Today's Portfolio Highlights:
Marijuana Innovators: The best performer of the day among all ZU names was HEXO (NYSE:HEXO), a consumer-packaged goods cannabis company that is “making moves”. It made two significant announcements overnight, including an offering of $360 million in convertible preferred notes and the purchase of Canada’s largest privately-held cannabis producer Redecan. “I absolutely love this combination of deals,” said editor Dave Borun. “It’s a perfect example of a clever and nimble management team that’s adapting to the current environment with sensible but aggressive moves.” HEXO climbed just under 10% today and is now up more than 81% since the editor added it in December 2020. By the way, this portfolio also had the second best performer today as Canopy Growth (NASDAQ:CGC) advanced 5.5%. Make sure to read Dave’s complete commentary on HEXO’s moves.
Headline Trader: “It's the last trading day of May, and the "sell in May and go away" idiom didn't come to fruition, with the S&P 500 trading less than 1% off its all-time highs. The S&P 500 has held a 75% + 52-week rally for months now, but this will not continue forever. Still, this doesn't mean that a correction is on the horizon.
“Investors keep saying that the market is sitting at 'as good as it gets' levels, but it's a fool's errand to try to call a peak. EPS estimates continue to drive higher, and interest rates are looking like a nonissue for now.
“Q1 earnings were unbelievable, far exceeding expectations, which didn't catapult stocks higher like some may have anticipated but instead justified how far the market has come since the pandemic lows. I expect to see continued consolidation into the next set of earnings (if the Fed doesn't change its rhetoric), and savvy stock picking is going to be the key to success in this choppy market moving forward. I am looking to Q2 earnings and guidance for another broader market catalyst.” – Dan Laboe
Counterstrike: “As expected, we saw low volumes and a tight trading range. People just leave early on days like today, so there was a severe lack of action. Even so, markets finished strong for the week.
“The bulls broke some bearish setups in the S&P, so expect bullish action going forward. The lack of an infrastructure plan is a risk, but this should get done eventually. The market really isn't concerned.
“Have a good weekend everyone. It has been a wild five months, but things are slowing down. We have to slow down ourselves with the market or we will overtrade. Try to enjoy this weekend and let's see what the pace is next week.” – Jeremy Mullin
Have a Great Memorial Day Weekend!
Jim Giaquinto
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