Contents
Article Summary
U.S. stocks closed May on a mixed note, with the S&P 500 achieving its best May performance since 1990, up 6%. The Dow rose 0.13%, while the Nasdaq slipped 0.3% despite a strong monthly gain of nearly 10%. Tech stocks led the rally, but trade tensions and U.S. tech restrictions on China weighed on markets. Cooling inflation and the Fed’s core PCE index provided some relief, though health care was the only sector to post a monthly loss. Trade policy remains a key risk as markets head into June.
What This Means for You
- Tech Sector Opportunities: The Nasdaq’s 10% surge highlights the continued strength of tech stocks. Consider diversifying into high-performing tech ETFs or individual stocks.
- Trade Policy Risks: Renewed U.S.-China trade tensions could impact global markets. Stay informed and hedge investments in sectors vulnerable to tariffs.
- Inflation Watch: Cooling inflation may reduce the likelihood of further rate hikes, benefiting growth stocks. Monitor Fed announcements for investment timing.
- Health Care Caution: The sector’s 6% monthly loss suggests volatility. Reassess health care holdings and consider reallocating to stronger sectors.
Dow inches higher, S&P 500 caps best May since 1990
U.S. stocks ended Friday on a mixed note after recovering from early losses, closing out a volatile but strong May.
The S&P 500 finished nearly flat but posted a 6% monthly gain — its best May since 1990. The Dow rose 0.13% on the day, and the Nasdaq slipped 0.3%, despite briefly falling over 1.6% earlier in the session.
For the month, the tech-heavy Nasdaq surged nearly 10% as technology shares continued to drive momentum. The Dow added 4%. Friday’s subdued finish followed reports of expanding U.S. tech restrictions on China and renewed trade tensions.
The Trump administration plans to tighten export rules targeting subsidiaries of firms already on the Entity List, Bloomberg reported. That news came hours after former President Trump accused China of violating its existing trade deal on social media.
Treasury Secretary Scott Bessent said talks with China are “stalled” and suggested a Trump-Xi call is needed to advance negotiations.
Trump’s tariff uncertainty
Meanwhile, legal uncertainty surrounding tariffs added to investor anxiety. A U.S. appeals court temporarily allowed Trump-era tariffs to remain in place, reversing a trade court’s earlier decision.
The administration is also weighing a 15% duty for up to 150 days under the Trade Act of 1974.
Despite the geopolitical and legal headwinds, investors found optimism in cooling inflation. The Fed’s preferred inflation gauge—the core Personal Consumption Expenditures index—rose in line with forecasts in April, helping temper fears of further rate hikes.
Health care was the only S&P 500 sector to post a monthly loss, down nearly 6%. All other major sectors finished May in the green, buoyed by easing inflation and strength in tech.
Markets head into June with gains intact, but trade policy remains a looming risk.
People Also Ask About
- What drove the S&P 500’s strong May performance? The S&P 500’s 6% gain was fueled by tech sector strength and cooling inflation.
- How did trade tensions impact the market? U.S. tech restrictions on China and tariff uncertainty created volatility but didn’t derail the monthly rally.
- Why did the health care sector underperform? Health care fell 6% in May due to sector-specific challenges and investor rotation into tech.
- What is the outlook for June? Markets remain optimistic but face risks from ongoing trade policy developments.
Expert Opinion
“The tech sector’s dominance in May underscores its resilience amid global uncertainties. However, investors should remain cautious as trade tensions and tariff policies could introduce volatility in the coming months. Diversification and a focus on inflation-sensitive sectors may help mitigate risks.”
Key Terms
- S&P 500 May 2023 performance
- Tech sector stock rally
- U.S.-China trade tensions 2023
- Core Personal Consumption Expenditures index
- Trump-era tariffs impact on markets
- Health care sector underperformance
- Nasdaq tech stock surge
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