Market Insights

Stocks just finished their best month since January. Now the question is, how long can they stay trapped in a range?

The S&P 500 inched higher over the last holiday-shortened week, capping off a 2.2 percent gain for May. Almost all the move occurred in the first half of the month and was followed by a succession of positive economic developments. The index’s Friday close was also its highest since March 16. Traders may now look for a breakout in coming sessions, even though fewer events are on the agenda.

“Manufacturing shifted into a higher gear,” the Federal Reserve declared in its Beige Book survey of economic conditions. Non-farm payrolls and personal spending beat estimates. Unemployment and jobless claims fell more than expected. Rail traffic, a forward-looking indicator of economic growth, kept rising. There were some geopolitical jitters from Italy, but those quickly faded.

Technology led the charge as key benchmarks tracking the sector seemed to flash a classic bullish signal. Chinese names in particular had a strong week after MSCI added mainland stocks to its indexes and investors plowed money into initial public offerings like Huya (HUYA) and Iqiyi (IQ). Facebook (FB) and Alphabet (GOOGL) were other big winners.

The S&P 500 has consolidated along its 100-day moving average since early May. Other moving averages like the 20- and 30-day have also been rising and are now above the 50-day moving average.  Those technicals could make chart watchers begin think the intense volatility of February and March has finally subsided.

S&P 500 chart with moving averages highlighted.

Energy was the best sector overall, rebounding 2.4 percent after a sharp pullback the previous week. Metal stocks rose after President Trump imposed tariffs on foreign competitors, retailers benefited from strong earnings and biotechnology climbed as investors prepared for presentations at the American Society of Clinical Oncology’s (ASCO) annual conference.

Speaking of ASCO excitement, Nektar Therapeutics (NKTR) was the single best-performing stock in the S&P 500 last week with a 13 percent gain. General Motors (GM) trailed fractionally after receiving a $2.25 billion investment from SoftBank of Japan. TripAdvisor (TRIP) was No. 3, continuing to run higher after its earnings report on May 8 suggested a big turnaround is underway.

Financials were the worst-performing major sector last week, hammered 1.3 percent by Italy’s debt scare. Latin American stocks also had a rough week amid turmoil in Brazil.

Dollar Tree (DLTR) had the biggest drop among S&P companies, cratering 15 percent on a weak quarterly report. Michael Kors (KORS) was second-worst, down 13 percent. The handbag maker had pegged its future on a shift to wholesaling, but guidance in that area disappointed.

The event calendar is much quieter this week. Today brings the start of Apple’s (AAPL) developer conference and U.S. factory orders. Tomorrow features the Institute for Supply Management’s service index and Wednesday brings oil inventories. Initial jobless claims and Broadcom (AVGO) earnings follow on Thursday.