Dow declines 200 points and ends the month. May was turbulent, but little changed.

 

U.S. equities experienced a turbulent day on Tuesday, wrapping up a volatile month marked by inflation and recession concerns. The Dow Jones Industrial Average concluded the day down 222.84 points, or 0.7%, closing at 32,990.12. The S&P 500 also dipped 0.6% to 4,132.15, while the Nasdaq Composite eased 0.4% to 12,081.39. Throughout the day, the technology-heavy Nasdaq index fluctuated between a 0.5% gain and nearly a 1.6% loss. May was a roller-coaster month for U.S. stocks, with the Dow and S&P 500 ending relatively flat, thanks to a significant rally the previous week. However, the Nasdaq saw a decline of approximately 2.1% for the month. Investors are grappling with concerns of high inflation affecting economic growth. In Europe, Eurozone inflation figures for May reached a record high, rising by 8.1%. Oil market developments were also in focus, with initial surges in oil prices following the European Union’s decision to ban most crude imports from Russia. However, prices retreated from their highs after reports indicated that the Organization of the Petroleum Exporting Countries (OPEC) was considering suspending Russia from its oil-production deal.

 

Energy stocks, initially the day’s top performers, later turned into the worst-performing sector within the S&P 500, with Chevron dropping 2% and Schlumberger falling 4.3%. Industrial stocks linked to economic cycles also saw declines, with Honeywell losing 1.4% and Nucor falling 3.8%. Health care was another lagging sector, with UnitedHealth Group down 2%. Amidst the mixed market performance, some mega-cap technology stocks provided support to the broader indexes, with Amazon rising 4.4% and Google parent Alphabet gaining 1.3%.

The month of May saw various challenges, including the Federal Reserve’s interest rate hike to combat high inflation, recession fears due to tightening monetary policies, disappointing corporate earnings reports reflecting the impact of inflation on consumers and profits, concerns about the ongoing war in Ukraine, and COVID outbreaks in China affecting global commodities and supply chains. During the month, the S&P 500 briefly entered bear-market territory on May 20, falling 20% from its previous high during a session. The Dow experienced its longest weekly losing streak since 1923, falling for eight consecutive weeks until last week’s rally. While stocks rebounded last week, they are still significantly below their previous highs, with the Dow down 10.7%, the S&P 500 down 14.2%, and the Nasdaq down 25.5%. Navigating bear markets remains challenging due to their inherent volatility and the potential for sharp upside rallies, according to Wolfe Research’s Chris Senyek.

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