Day Traders Diary

5/3/21

The major averages are trading higher to start the month of May. The Dow Jones is set to rise 185 points. The S&P 500 is up 21 points or 0.5% and the Nasdaq is up 60 points or 0.44%.

Berkshire Hathaway shares rose 1% in early trading after Warren Buffett's conglomerate reported a 20% surge in operating earnings and continued to buy back large amounts of its own shares. Buffett also revealed to CNBC that when he is no longer in charge, Greg Abel, vice chairman of all non-insurance operations, will succeed him.

Bets on the economic reopening were gaining in early trading. Norwegian Cruise Line holdings and Carnival Corp. were both higher by 1% in the premarket. Caterpillar and Bank of America were also higher.

Some tech shares, such as Tesla and Netflix, were weak in early trading.

Monday marks the first trading day of May. Despite Friday's weakness in equities, the S&P 500 notched its third straight month of gains in April, adding more than 5% to the index as investors bet on a big economic and profit recovery from the pandemic.

The S&P 500 is now up 11% for the year. The benchmark closed at record levels on Thursday on the heels of blowout earnings results from Apple and Facebook.

The Dow rose about 2.7% last month, while the Nasdaq Composite gained 5.4% in April.

Some investors are expecting weakness in the new month given the old "sell in May and go away" Wall Street adage. This mantra calls for taking off risk from May to October, a period where the market is more prone to sell-offs historically.

Data going back to 1928 shows that the May-October period has the lowest average and median returns of any six-month period of the year with the S&P 500 up 66% of the time on an average return of 2.2%, according to Bank of America.

The market might see mediocre performance from here especially after a massive rally from November to April, where the S&P 500 gained 28%, the bank noted.

Manufacturing PMI data for April will be released at 9:45 a.m. ET on Monday, followed by ISM manufacturing at 10 a.m.

April's jobs report will be released on Friday.

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.