Flattish May can lead to a June ramp -Carson Group

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S&P 500, Nasdaq post modest gains, DJI slips

Comm svcs leads S&P 500 sector gainers; industrials weakest

Euro STOXX 600 index ends down 0.5%

Dollar, bitcoin down; gold, crude rise

U.S. 10-Year Treasury yield edges down to ~3.68%

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The S&P 500 index .SPX eked out a gain last month. With this, it marked the 10th time out of the past 11 years that the month of May has finished with a gain.

Turning to the month of June, Ryan Detrick, chief market strategist at The Carson group, notes that historically stocks have not found it to be the friendliest of months.

"Since 1950, up 0.03% on average, the fourth worst month of the year. Over the past 20 years, only January and September have been worse and in the past decade, it is again the fourth worst month. The one bit of good news is during a pre-election year is it up 1.5%, the fifth-best month of the year," writes Detrick.

Detrick says that years that gained big in January (like 2023, SPX January gain 6.2%) tend to see some periods of consolidation in late May/early June, but eventually experience a surge into July. Given a flattish overall May, Detrick thinks this pattern could be playing out again.

What if stocks were having a good year heading into June?

According to Detrick, since 1950, if the S&P 500 was up more than 8% for the year going into June (like this year, SPX up 8.9%), the month of June was up an impressive 1.2% on average versus the average June return of 0.03%, while in a pre-election year the returns jumped to 1.8%.

He adds that the percent of the time where returns were higher gets better as well, from 54.8% in your average June to nearly 74% if up 8% or more for the year heading into June, to 80% of the time higher if up 8% for the year in a pre-election year.

"Overall, it has been a very nice run for stocks this year and we remain overweight stocks in the Carson Investment Research House Views. June could potentially cause some volatility, but when all is said and done, we wouldn’t bet against more strength and higher prices in June."

(Terence Gabriel)



Data had a case of the Mondays on Monday. It needed more coffee.

On the bright side, it provides fresh signs that the Fed's restrictive policy is working its magic by cooling the economy down.

First, the services sector surprised analysts by losing momentum last week.

The Institute for Supply Management's (ISM) non-manufacturing purchasing managers' index (PMI) USNPMI=ECI landed at 50.2, marking a 1.6 point decline from April and coming in nearly two points south of consensus.

And as 50 is the magic level below which the sector is in contraction, the services sector was hanging onto expansion by its fingernails.

Services account for around four fifths of the U.S. economy, and it's worth a reminder that the sector contributed an eye-opening 90.8% of the 283,000 private sector job adds last month.

Below the headline, new orders lost steam employment dipped into contraction. On the plus side, prices paid - an inflation harbinger - rose at a decelerated pace.

The pullback "is due mostly to the decrease in employment and continued improvements in delivery times (resulting in a decrease in the Supplier Deliveries Index) and capacity, which are in many ways a product of sluggish demand," writes Anthony Nieves, chair of ISM's services survey committee. "The majority of respondents indicate that business conditions are currently stable; however, there are concerns relative to the slowing economy."

Here's a breakdown of headline Services PMI and select components:

But S&P Global piped in with services PMI data of its own USMPSF=ECI, revising its initial "flash" take down 0.2 point to a much more upbeat 54.9.

"The US continued to see a two-speed economy in May, with the sluggishness of the manufacturing sector contrasting with a resurgent service sector," says Chris Williamson, chief business economist at S&P Global. "However, just as demand has moved from goods to services, so have inflationary pressures."

The rival PMIs differ in the weight they allot to their various components - new orders, employment, etc.

The two indexes seem to be in closer agreement on manufacturing, but they tend to part ways when it comes to services:

Next, new orders from American factories USFORD=ECI rose by an unimpressive 0.4% in April, half the pace projected by economists and a mild slowdown from March's 0.6% increase.

Tighter lending conditions resulting from Fed tightening and recent regional bank failures, along with the gathering storm clouds of recession and weakening demand, are among the likely culprits for the shortfall.

The Commerce Department also revised its initial stab at orders for core capital goods USNDCG=ECI - which excludes defense items and aircraft, and is considered a proxy for U.S. business capex plans - shaving off 10 basis points to 1.3%.

Still the number remains fairly robust, marking the closely-watched metric's largest monthly gain since December 2021.

Financial markets are currently pricing in an 80.6% likelihood that Powell & Co will press the 'pause' button at this month's monetary policy meeting, up from 74.7% on Friday, according to CME's Fedwatch tool.

(Stephen Culp)



Major U.S. indexes are little changed in early trading on Monday, with the S&P 500 .SPX barely higher as investors speculate over the likelihood the Federal Reserve could pause in its rate hikes at its next meeting.

The Nasdaq .IXIC is also slightly green after notching its sixth straight weekly gain on Friday, its longest winning streak since one that ended January 2020.

The S&P 500 added to gains briefly after an economic report showing new orders for U.S.-made goods rose for a second month in April, boosted largely by defense spending. The overall manufacturing industry continued to struggle under the weight of higher interest rates, however.

Communication services .SPLRCL and utilities .SPLRCU are the best performing S&P 500 sectors, while energy .SPNY, financials .SPSY and industrials .SPLRCU are posting losses.

Here is an early market snapshot:

(Caroline Valetkevitch)



S&P 500 growth .IGX suffered its worst year ever relative to S&P 500 value .IVX in 2022. However, that's turned around so far in 2023.

A little over five months into the year, amid a growth resurgence, the IGX/IVX ratio is up 8.6% YTD, putting growth on track for its best year vs value since 2020.

Indeed, given 2022's market meltdown, "growth" and "value" had all started to taste the same. But thanks to a tech-titan surge in the new year, the dividing line between growth and value is moving back to what market players had become more accustomed to - that is a very heavy concentration of tech .SPLRCT in growth, with value more weighted to financials .SPSY and more cyclical sectors.

As of the end of May, tech accounted for nearly half of the weighting in the SPDR S&P 500 growth ETF SPYG.P. And although tech accounted for around 21% of the weighting in value .IVX, financials and industrials .SPLRCI combined had a more than 35% exposure in the SPDR S&P 500 value ETF SPYV.P.

Tech .SPLRCT has been the best-performing S&P 500 sector YTD with a 35.8% gain. Financials .SPSY are off 4.5% so far in 2023. Energy .SPNY is the worst-performing sector off 9.2%.

After topping in late 2021, the IGX/IVX ratio put in a bottom in early January of this year. It has since reclaimed its 200-day moving average (DMA):

However, the 200-DMA has yet to tick up, and in the wake of the Nasdaq posting a six-week win streak, its longest since 2020, the ratio now faces a barrier at its early 2021 trough, as well as the broken support line from late 2016, which is now a resistance hurdle.

With the NYFANG index .NYFANG, as a proxy for tech-titans, up about 66% YTD, on track for its second-biggest yearly rise ever, and the KBW regional banking index .KRX down more than 22% YTD, on pace for its biggest yearly slide since 2009, some traders are on guard for a potential rotation.

Thus, although the current trends appear strong, with the ratio nearing resistance, it may be an opportune time to look for some air to come out of growth's tires vs value.

(Terence Gabriel)



(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


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