On Friday, the S&P 500 (SP500) declined by 0.51%, ending the week at 5,277.51 points. This was due to losses in two of the four sessions of the week, which was shorter due to the Memorial Day holiday. The corresponding SPDR S&P 500 ETF Trust (NYSEARCA:SPY) experienced a 0.39% drop.
In the abbreviated holiday week, the benchmark index noted its first weekly fall following a five-week upward trend.
The S&P (SP500) didn’t manage to sustain last week’s record closing high of 5,321.49. Investors are now evaluating diminishing prospects for substantial Federal Reserve rate reductions in 2024 and some hiccups in a generally solid Q1 earnings season. This week saw a dip in Salesforce (CRM) shares following the company’s Q1 report and guidance falling short of Wall Street’s expectations, while Dell (Dell) also dropped after providing weak margin guidance.
On Friday, markets were presented with the April PCE inflation report. The Fed’s official target – the 12-month Core PCE – remained stable at 2.8% compared to March. The inflation data matched consensus forecasts, but the spending detailed in the report was slightly lower than expected, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
“In this moment of caution, a slowdown in consumer spending leading to lower inflation and consequently slow rate cuts by the Fed would be beneficial for the markets,” Zaccarelli explained. However, he warned that “if consumer spending – and the economy – decelerates too swiftly, then corporate earnings and stock prices will plummet much faster than the Fed can reduce rates, warranting caution,” he added.
Despite the overall weekly decline, a Friday afternoon rally in stocks helped the S&P 500 (SP500) and the blue-chip Dow index (DJI) end the day on a positive note. The tech-centric Nasdaq Composite (COMP:IND) experienced a slight downturn but managed to close above its lowest point.
While the key indexes suffered a fall this week, they rallied in May, reaching record highs. The S&P 500 (SP500) surged 4.80%, marking its strongest month since February. The Nasdaq Composite (COMP:IND) jumped 6.88%, its steepest ascent since November 2023. The Dow industrials (DJI) advanced by 2.30%, recording its best progress since December 2023. The blue-chip average crossed the 40,000 mark this month.
AI chipmaker Nvidia’s (NVDA) shares soared by 26.89% in May, emerging as a standout winner for the month. The company’s Q1 results, forward guidance and plans for a 10-for-1 stock split effective in June were met with enthusiasm by investors.
“NVDA has displayed a possibly unprecedented streak of surpassing market consensus for revenues and profits, increasing its guidance, then outperforming the raised guidance and increasing it once again,” noted Steve Sosnick, Chief Strategist at Interactive Brokers, this week.
June trade will commence next week. Investors will be keeping an eye on the May U.S. jobs report and an anticipated rate cut by the European Central Bank that would initiate its rate-easing cycle. Nvidia’s (NVDA) 10-for-1 stock split will take effect late Friday, with shares commencing trade on a split-adjusted basis on Monday, June 10.
Turning to the weekly performance of the S&P 500 (SP500) sectors, six out of 11 saw an increase. Energy and Real Estate were the top performers, each rising by about 2%. Health Care, Industrials and Technology experienced a decline. A performance breakdown of the sectors and their corresponding SPDR Select Sector ETFs from May 24 close to May 31 close is provided below:
- #1: Energy +2.01%, and Energy Select Sector SPDR Fund ETF (XLE) +2.00%.
- #2: Real Estate +1.80%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) +1.87%.
- #3: Utilities +1.62%, and the Utilities Select Sector SPDR Fund ETF (XLU) +1.71%.
- #4: Consumer Staples +0.09%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +0.31%.
- #5: Materials +0.08%, and the Materials Select Sector SPDR Fund ETF (XLB) +0.19%.
- #6: Financials +0.05%, and the Financial Select Sector SPDR Fund ETF (XLF) +0.07%.
- #7: Consumer Discretionary -0.31%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -0.42%.
- #8: Health Care -0.58%, and the Health Care Select Sector SPDR Fund ETF (XLV) -0.49%.
- #9: Communication Services -0.60%, while the Communication Services Select Sector SPDR Fund (XLC) +0.37%.
- #10: Industrials -0.84%, and the Industrial Select Sector SPDR Fund ETF (XLI) -0.76%.
- #11: Information Technology -1.46%, and the Technology Select Sector SPDR Fund ETF (XLK) -2.33%.
For investors interested in understanding future trends, consider checking out the Seeking Alpha Catalyst Watch for a breakdown of noteworthy events scheduled for next week.
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