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The S&P Closes Out a Volatile May with a Small Gain

Weekly Update – June 03, 2022

  • The S&P 500 index declined 1.2% last week amid mixed signals on the US economy from corporate earnings reports and May jobs data.
  • The market benchmark ended the week at 4,108.54, down from last Friday’s closing level of 4,158.24. Last week’s move came in only four sessions as the market was closed Monday for the Memorial Day holiday in the US.
  • The S&P 500 concluded May on Tuesday with a monthly increase of just 0.01% as a 6.6% jump in the index last week managed to offset declines posted in other weeks. Despite ending nearly flat with where April closed, May was a tumultuous month in which the S&P 500 came close to bear market territory but narrowly escaped it. The index is now down 14% for the year to date.
  • Investors started June seeking indications of how well the US economy is handling higher rates and prices. However, quarterly earnings have been mixed, with some companies still reporting results above expectations while others have missed Street estimates or issued weaker-than-anticipated guidance amid inflation and/or currency impacts.
  • Friday, May jobs data from the Labor Department also came in mixed. While the data showed nonfarm employment increased by 390,000 jobs last month, topping the Econoday consensus estimate for a 325,000 rise, this represents a slowdown from April’s upwardly revised 436,000 jobs increase. Also, the unemployment rate was unchanged at 3.6% when an improvement to 3.5% had been expected, and the Labor Department noted nonfarm employment is still 822,000 short of its February 2020 level.
  • By sector, health care had the largest percentage drop of the week, down 3.1%, followed by a 2.2% decline in real estate and a 2.1% loss in financials. Other sectors in the red included consumer staples, utilities, technology, materials and communication services.
  • On the upside, energy climbed 1.2% while industrials and consumer discretionary eked out gains of less than 0.1% each.
  • The health care sector’s drop followed adjustments BofA Securities made late last week in its ratings for managed care stocks as the firm anticipates rising interest rates and regulatory pressures will adversely impact the medical loss ratio for companies like Centene (CNC) and Molina Healthcare (MOH). Shares of Centene fell 2.9% on the week while Molina Healthcare shed 7.7%.
  • In real estate, shares of Vornado Realty Trust (VNO) fell 6.8% last week as BMO Capital downgraded its investment rating on the stock to market perform from outperform. Also, Morgan Stanley lowered its price target on Vornado’s shares to $30 each from $39 while maintaining an underweight rating.
  • The climb in energy came as crude oil futures rose. Among the gainers, DiamondBack Energy (FANG) added 1.3% while Marathon Oil (MRO) increased 2%.
  • Next week’s earnings calendar will feature J.M. Smucker (SJM), Campbell Soup (CPB), Five Below (FIVE) and Vail Resorts (MTN).
  • On the economic calendar, all eyes will be on May consumer price data and five-year inflation expectations set to be released Friday.
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