Watch out for a rocky June

Stocks ended May with gains, but rising interest rates and worries about Japan and the economy may make the month ahead a lot more volatile.

By Charley Blaine May 31, 2013 8:14PM
Stock market report © Photodisc Blue/Getty ImagesSo much for "Sell in May and go away." But investors should watch out for June.

Stocks ended the month with decent but hardly spectacular gains. That was the good news.

The Dow Jones industrials ($INDU) were up for a sixth straight month. The Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) saw their seventh monthly gain in a row.

Friday the day was a different story. Stocks suffered their worst losses in the last six weeks, most of it in the last hour of trading. The big culprit appears to have been rising interest rates; the 10-year Treasury yield hit 2.164%, up from Thursday's 2.124%. In addition, there was profit taking as well as rebalancing of indexes managed by Russell Investments. The major indexes ended lower for a second straight week.

June sets up as a trickier month than May, in part because June historically is one of the year's weakest months.

To add to the risk, the Dow and S&P 500 sit just below all-time highs; the Nasdaq is just off a 13-year high. Interest rates have been moving higher, and the Federal Reserve is thinking about dialing back the scope of its bond buying, which could put more pressure on rates.
Plus, the week ahead brings a number of important economic reports, including the May payroll-and-unemployment report.

That's a lot to think about. So don't be surprised if there's a lot of drama.

The Dow closed down 209 points to 15,116 on Friday. The S&P 500 dropped 24 points to 1,631, and the Nasdaq fell 35 points to 3,456. The Dow and S&P 500 declines were their worst one-day falls since April 15; the Nasdaq's was its worst since May 22.

For the week, the Dow fell 1.2%, with the S&P 500 down 1.1% and the Nasdaq down 1.4%. And that trimmed May's gains. The Dow was up 1.86% for May, though it had been up as much as 3.8% after Monday's close at a new high. The Dow is still up 15.3% for the year.

The S&P 500's gain was 2.1%; it had been up as much as 4.5% on May 21. For 2013, the index has gained 14.3%. And the Nasdaq's 3.8% gain for the month was a pullback from 5.21% on May 21. The index still sports a 14.5% gain for the year.

What weighed on the markets all week were worries about how the economy might react if the Fed lets interest rates shoot up. It's a valid concern. The 10-year Treasury yield was at 1.68% on April 30 and ended May 29% higher. It's also up 23% from 1.76% on Dec. 31. Another issue: the big sell-off in Japan that has knocked the Nikkei-225 Index ($JP:N225) down 11.9% in a touch more than a week.

Both of these concerns will be front and center all next week. And the big worry is what happens if the Fed stops its $85-billion-a-month bond-buying program cold turkey.

A key event will be the May jobs report, always the month's most important, due before Friday's market open.

Plus investors around the world will parse the monthly reports on the manufacturing and non-manufacturing economies from the Institute for Supply Management. Those are due Monday and Wednesday.

Some good news may well come from the auto industry. Edmunds.com projects that automakers will report selling 1.42 million cars and trucks in May. That would translate into a 15.1-million-unit annual sales rate, which would be up from a 14.9-million-sales rate in April and a 15.3-million rate in March. Automakers will report sales Monday.

Friday's losses were problematic. The Dow was up as many as 68 points at 11:15 a.m. ET -- and then proceeded to drop nearly 277 points to the close. Boeing (BA), Walt Disney (DIS), Exxon Mobil (XOM), Johnson & Johnson (JNJ), Procter & Gamble (PG) and Chevron (CVX) contributed nearly 90 points of the blue chips' loss by themselves.

Intel (INTC), up 7 cents to $24.28, and Alcoa (AA) were the only winners among the 30 Dow stocks.

The swing from top to bottom was 16 points for the S&P 500, 44 points for the Nasdaq and 32 points for the Nasdaq-100 Index ($NDX). The index, which tracks the largest Nasdaq stocks, closed down 30 points to 2,982 on the day. It was down 0.3% for the week but up 3.3% for the month.

Only 31 S&P 500 stocks were higher, led by Edwards Lifesciences (EW), W.W. Grainger (GWW) and Cummins (CMI). Meanwhile, just 12 Nasdaq-100 stocks were higher, led by Catermaran CTRX) and Sears Holdings (SHLD). 

Netflix (NFLX) was up $3.59 to $226.25. It will return to the Nasdaq-100 on June 6. It was removed in December.

For the month, financial, industrial and energy stocks were the leaders. The big laggard was utility stocks, pulled lower as interest rates moved up. Also lower were real estate investment trusts,

Hewlett-Packard (HPQ), Cisco Systems (CSCO) and JPMorgan Chase (JPM) were the top Dow performers, up 15.7%, 10.9% and 10.6%, respectively.

Electronic Arts (EA), Micron Technology (MU) and WPX Energy (WPX) were the S&P 500 winners, up 32.9%, 27% and 25.5%, respectively.

Among Nasdaq-100 stocks, the winners were Micron; Avago Technologies (AVGO), up 20.5% and Cisco Systems.

Apple (AAPL) finished the month off 1.6% at $449.73. It's still down 15.4% for the year.

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67Comments
May 31, 2013 8:47PM
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Let me see, the Fed has been propping up this wet dream economy since 08 and now are rethinking throwing air money at the market to keep it afloat. Hold on to your hats boys and girls the crash that is coming will make 08 look weaker than a popcorn Fart!
May 31, 2013 8:59PM
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With nearly everything in the Red Flag zone, cool-headed investors are only kidding themselves. Move it here or there, sell this, but that... take a step back and try a sober assessment instead of Kool Aid induced one-- the majority of money in the markets came from Bernanke and had no backing when he printed it. It isn't real. It isn't rooted in economic anything. IT IS FAKE, just like the value of everything artificially lifted by it. QE wasn't supposed to hang in the markets and pump out 300,000 millionaires a week, it was meant to course the economy and restore fundamental stability. Impossible now. YOUR investments are phony. Both residential and commercial real estate is imperiled by over-supply. There is a massive shortage in new enterprise caused directly by big business platforms, so who is so stupid as to think REITs are anything more than book-cookers?. Cars are only sold via Subprime credit. With jobs for the able- blockaded and youth not yet skilled enough to be delegated-to by dumb alumni administrators, every business platform is failing. They sold America for a spike of wealth they cannot sustain because they don't know how to operate a genuine business. We have- too many lawyers, accountants, financiers and administrators. Where are the workers that actually DO? Even Bernanke knows his days are numbered and the longer he drags out this buffoonery, the less likely it is that he will outrun it. Where would he run to? It's now June. Five months of absolutely NO ECONOMY, living on $85 billion of falsely infused cash that is not helping America today while guaranteeing it's suppression to obligation tomorrow. Snap out of it you idiots... only YOU can end this well. Get writing those checks to the rest of us.

May 31, 2013 9:20PM
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The market can only be manipulated for so long.  You can only tell so many lies and produce so much fake data before investors kick their brain into gear and grasp that they've been taken.  It's no longer "will the bubble burst?" ... but "how far and how fast will the market fall."
May 31, 2013 8:45PM
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As stated a couple of days ago, get ready for a market dump; thousands  of points, soon.

Look for gold and silver having a strong move up soon.

Make good choices.

Jun 1, 2013 12:47AM
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The only thing sustaining the bull run is cheap money. That is not sustainable. I would ask the question: what in the heck is all the cheap, printed fake money accomplishing? It's not creating jobs, it's not going to the average consumer, so I can only surmise that it's going to the wealthy and wall street so that they can have a good time Charley and create false statistics. We already know that housing stats are skewed by big money investors using cheap $ to by rentals. So what else of the stats are fake???
Jun 1, 2013 9:40AM
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Yesterday was just another "PUMP AND DUMP" day for the  risky hedge traders---getting their % of profits for the end of month--Naturally the Investors take it in their shorts!!!!!
May 31, 2013 8:40PM
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Up then down.

Right then left.

One is the market, the other my golf game.

No one ever said it would be easy.

Unless it's election time and some one  wants your vote.

Jun 1, 2013 7:59AM
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Let the big boys eat it this time!!! "Wall Street Week Ahead: Good news on jobs may be bad for stocks" This is what we need, good news on jobs. Our main economic problem now is consumer purchasing power. Printed money and real inflation are a tax on that purchasing power. The fed needs to keep the real inflation rate between a deflationary 1% and 0% inflation. No more real inflation. That means the fed responses to real inflation rate including gas and food and not the BS their feeding us now. Real interest rates need to increase, this will also put money in savors pockets and they will spend the extra money, adding to consumer purchasing power. Printed money and high inflated stock prices do not create jobs or improve the American people standard of living. Again, let the big boys eat it this time!!!!! The big boys need to realize that if the standard of living of the American people doesn't improve their wealth is an illusion.
May 31, 2013 9:03PM
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If the rolling brownouts hit the grid that services the printing press, Barry's spending spree will abruptly end and neighborhoods full of houses built of cards will be whisked away in the wind.
Jun 2, 2013 11:48AM
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The QEs are primarily designed to benefit Wall street central bankers and provide a soft crash landing.Then the central banks pushes debt"crack" on an unemployed and under-educated population and the MSM in the meantime is high on frack crack telling us everything is great who is really benefiting in this economy what is the cost?Is it The vast low income citizen/immigrant slave labor force or the central bankers??????
Jun 2, 2013 1:46PM
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This is not free Market  Capitalism with real price discovery as it should function it is manipulated impinged by central planning ie central banker/gov/fed .You have an economy designed to work with $ 20-30 a barrel oil it is 90-100.Central bankers trying to manipulate prices currencies to compensate so it is what it is now but NOT SUSTAINABLE for the future   We need to start looking long term as a country we need to evolve and adapt to the future or what then?????
Jun 2, 2013 10:53PM
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Well when the B.S. employment numbers come in tomorrow for the govs report, you can get ready to see the start of the biggest run on the banks the planet has ever known. Michael Ruppert was dead on when he stated that the government is chasing a $700 trillion dollar bubble down the drain. So my thought is this: You no longer have to care who won the $590 million dollar lottery, or Warren Buffet spending his billions on another company to break your back. Nooooo, when this money pyramid collapses and the game is over, the only people who will be fortunate will be anyone who has anything tangible to their name to barter with because were all heading back to the stone age soon. Atleast we'll all be equal again! 
Jun 2, 2013 12:28PM
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What forced the actions of the Global FEDS, illegally sold as investments,  trillions in CDOs. Who was in Bed with the Big Banks and wrongly rated CDOs as Triple AAA, Moody's and other bogus rating agencies. Who benefits from Global Fed Money Printing and CDOs, Big Banks and the already Wealthy.

The Problems of a Decade ago and the Derivatives Markets was and still is the Root of the problems we see today. However, instead of bailing out the average Worker, Corporations and their puppets in Government are bailing out themselves. They have insured that all wealth stays at the top while sucking away what's left at the middle or near the bottom.

Years ago, Big Banks used bogus computer models to come up with Bernard Madoff styled criminal type investments which they have spread across the Globe. The Mass Media reports only that the Global Feds are Printing Money, not the FACT that Big Banks are making a Mint off of creating a Problem and making a Huge Profit for doing so.

Jun 2, 2013 9:43PM
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Bernanke has dropped hints two weeks in a row that he will raise interest rates (because the economy is so improved(?)).  The comments have been trial  balloons to see how the market will react.,  It closed in the red for days following each announcement. I assume investors have gotten thre clue that you cannot continue to print counterfeit money ad infinitum(?).
Jun 1, 2013 9:17AM
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So many were wrong about May....Now they are squealing about June....What's next ??

 

I'll huff and I'll puff and blow your house down in July..

A couple weeks of resettling around the Globe; Some profit taking; An Active VIX; An old Bull that no one has tagged yet; Junes that just smolder; A FED that's not giving any concrete guidance; Yeah I guess we could go through some Doldrums? Maybe even a little more blood-letting..?

I don't see anyone resigned to Eurphoria yet..?

And only naysayers, nibbling at the edges...Sometimes hard to get an Optimist down. 

Jun 2, 2013 9:52PM
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All these "geniuses" should be sunning themselves in their "vacation homes" bought with the monies they made in the market that they know so well. Who are you people?
Jun 2, 2013 3:49PM
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We have walked this way before, and taken many paths to get what we have wanted...

 

What we do or accomplish in the End is how we will be judged.....until then...

Jun 1, 2013 1:02AM
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If we get a serious correction 5-10% then the funds will have to go somewhere and that will drive interest rates back down.  The whole rate thing is a way for the bears to halt the surge and it will work. But let's see if the economy doesn't stall out this summer and we're right back in a pickle.
Jun 2, 2013 4:00AM
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The Fed isn't going to stop its Quantitative Easing soon.  It doesn't want to stop because Treasury bond interest rates would rise, causing the federal government to partially shut down.

 

However, both the stock market and the housing market are in bubbles.  The Fed will keep these going until the dollar falls sharply on the emotional whims of foreign creditors of the U.S. government.

 

As for Japan, its program of inflation-driven stimulus is going to cra**** bond market some time soon.

 

On the other hand, the new Chinese Premier, Li Keqiang, has ended government stimulus and is implementing market controlled bank interest rates.  Look for the yuan to strengthen vs. the dollar by a lot, for China to switch from exporting to the U.S. to selling to its own citizens, and for 260 million migrant workers to have their lives improved by increased purchasing power, even if they still seem poor compared with us.

Jun 2, 2013 10:43AM
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Black Monday June 3 2013 ! TAKE YOUR MONEY AND RUN ! HERE COMES THE CRASH !
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