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May 1, 2018

MoneyBeat | Volatile Stock Market Rolls Into the ‘Sell in May’ Stretc | The Wall Street Journal on May 1st, 2018.

The Wall Street Journal
MoneyBeat

Volatile Stock Market Rolls Into the ‘Sell in May’ Stretch

By Ben Eisen
Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.
Market Snap at 05/01/2018 07:38:27 AM ET
S&P 500 Futures 0.02%
2647.5
DJIA Futures -0.06%
24116
U.S. 10 Year -2/32
2.96%
WSJ Dollar Index 0.37%
85.91
Crude Oil -0.88%
$67.97
Gold -0.8%
$1308.60
Europe
Asia
FTSE 100 0.47%
Nikkei 225 0.18%
DAX 0.25%
Hang Seng 1.74%
CAC 40 0.68%
Shanghai 0.23%

Overnight Developments

  • Global markets edged up as investors weighed global trade negotiations and central bank moves. S&P 500 futures pointed to a nearly flat open.
  • Many markets in Europe and Asia were closed for public holidays. The Stoxx Europe 600 was up 0.1%.
  • Earlier, Japan’s Nikkei Stock Average reversed modest early declines to end up 0.2%.
  • The Breakfast Briefing

    Stock investors, already grappling with the impact of more restrictive trade policies and rising bond yields, now have another concern: a historically weak time of year for the market.
    The arrival of May marks the beginning of a six-month stretch that usually has been a weaker time to own stocks. Over the last 20 years, the S&P 500 has gained 0.3% on average between May and October, less than benchmark Treasury notes, versus 6.5% between November and April, according to The Wall Street Journal's Market Data Group.
    Over the S&P 500's full history, the weak period produced an average annual gain of 2%, versus 5.1% for the strong period. The seasonal factors have become so well known that stock traders often refer to them with the phrase "sell in May and go away."
    The strategy of getting rid of your stocks at the beginning of May and buying them back come November works better in some years than others. Over the last five years, for example, it's actually been the opposite. The S&P 500 rose 5.6% between May and October versus 5% from November to April.
    Given that stocks are off their highs from January, major indexes could be primed for a rally, some say.
    “We should not ignore the weak seasonal period ahead, but we should be aware that this investment mantra to sell stocks isn’t gospel," said LPL Financial strategist Ryan Detrick in a blog post.
    But the arrival of May comes after more than three months of volatility, with stocks zig-zagging for a variety of reasons, including a softer stretch of economic data, the announcement of U.S. tariffs on China, the highest Treasury yields in years, and political concerns in Washington.
    Some of those factors may play into the seasonality. LPL Financial found that the weakest May-to-October period historically has been during the mid-term year of a presidential cycle. During those years, stocks rose 53% of the time between May and October.
    Though it's tough to know what will happen this year, don't discount the possibility that the recent volatility may continue.
    Are you planning to sell in May and go away? Let the author know your thoughts at ben.eisen@wsj.com.

    Daily Factoid

    On this day in 1956, seven investors contributed $105,000 to an investment partnership to be run by a 25-year-old from his bedroom in a rented house in Omaha. The "kid" was Warren Buffett.



    Key Events

    The Fed kicks off its latest two-day policy meeting, where it is expected to hold rates steady amid signs of mounting inflation.
    The final reading of the IHS Markit U.S. Manufacturing Purchasing Managers' Index, due out at 9:45 a.m., is expected to show the index rose to 56.5 in April from 55.6 the month before.  The Institute for Supply Management's manufacturing index is expected to show growth edged down to 58.6 from 59.3.
    At 10 a.m., data is expected to show construction spending accelerated to 0.5% from 0.1% a month earlier.

    Stocks to Watch

    BP—Up 0.7%: Shares in BP rose to their highest level since 2010 on Tuesday after the London-based firm reported its best quarterly profit since mid-2014.
    Apple—Up 0.4%: Apple releases quarterly earnings after the closing bell, and the company is expected to provide details on how much of its $269 billion overseas cash pile is coming investors’ way.
    Boeing—Up 0.1%: Aerospace giant Boeing said Tuesday it would buy plane-parts specialist KLX for $3.2 billion, boosting its push for a bigger slice of the aircraft-servicing business.

    Number of the Day

    2%
    The Fed’s preferred inflation gauge was up 2% from a year earlier in March, meeting the central bank's target for the first time in more than a year.

    Must Reads

    The Federal Reserve begins a two-day policy meeting today. Officials have done nothing to dispel expectations they will hold interest rates steady. Still, some in recent weeks have indicated they expect to raise rates as the year progresses.  
    President Donald Trump eased trade pressure on the EU and other top U.S. allies, giving them until June 1 to negotiate deals that could exempt them from U.S. steel and aluminum tariffs.
    Bitcoin has largely escaped government oversight, but regulators are examining whether other widely traded cryptocurrencies should be regulated as securities.
    The Justice Department urged a judge to consider “alternative remedies’’ if he decides not to block the AT&T-Time Warner deal.
    Auto-sales data is on tap today for April. U.S. sales were strong in March, aided by an extra selling day, strong incentives, fleet sales and a step-up in showroom traffic that was hampered by bad weather earlier in the year.