Day Traders Diary

5/31/22

The major averages fell in see-saw trading Tuesday as investors closed out a rocky month almost unchanged as the S&P 500 flirted with bear market territory amid inflation and recession fears. The Dow Jones Industrial Average fell 223 points, or 0.67%. The S&P 500 dipped 26 points or 0.63%. The Nasdaq Composite fell 49 points or 0.4%.

After a holiday hiatus Monday, U.S. stocks wrapped up a roller-coaster May. The Dow and the S&P 500 finished the month little changed, supported by a major rally the week prior. The Nasdaq lost about 2% on the month.

Tuesday's market action underscored fears that high inflation is weighing on economic growth. In Europe, euro zone inflation readings released Tuesday hit a record high for a seventh straight month, surging 8.1% in May.

Action in the oil market was also front-of-mind for investors. Oil prices initially jumped following the European Union agreeing to ban most crude imports from Russia. Then, oil prices eased from highs as The Wall Street Journal reported the Organization of the Petroleum Exporting Countries was weighing suspending Russia from its oil-production deal.

Energy stocks comprised the worst-performing S&P 500 sector Tuesday, after being the biggest gainer earlier in the session. Chevron fell about 2% and Schlumberger fell more than 4%.

Industrial stocks linked to the economic cycle also fell Tuesday. Honeywell and Boeing each lost about 1%.

Health care was another lagging sector, down 1.2% Tuesday. UnitedHealth Group and Johnson & Johnson were among the biggest laggards on the Dow, off by more than 1% each.

Meanwhile, a rally in some mega-cap technology stocks provided a bit of support to the broader indexes. Amazon rose more than 3% and Google parent Alphabet gained more than 1%.

Earlier in May, the Federal Reserve hiked interest rates by half a percentage point in a bid to tamp down generationally hot inflation. Recession fears have mounted as market participants fear the Fed's policy tightening will trigger an economic decline.

Disappointing quarterly reports in May from the likes of Walmart and Snap showed inflation hurting American consumers and eating into corporate profits.

Investors also eyed the continuing war in Ukraine and Covid outbreaks in China, raising concerns about global commodities and supply chain challenges.

Stocks struggled during the month amid the negative cross currents. The S&P 500 on May 20 dipped into bear market territory briefly, falling 20% below its high at one point during the session. Meanwhile, the Dow saw its longest weekly losing streak since 1923, falling for eight consecutive weeks before last week's rally.

Then, the Dow and the S&P 500 last week notched their best weekly gains since November 2020. The blue-chip average closed up 6.2% for the week, ending an eight-week losing streak. The S&P 500 gained 6.5%, and the Nasdaq added 6.8% on the week, ending positive after seven continual weeks of losses.

Still, stocks remain well off their highs. The Dow is about 10% below its record, the S&P 500 is down roughly 14%, and the Nasdaq is off by around 25%.

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