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.
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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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.
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.
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.
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.
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.
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...
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.
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