May provided a bumpy ride for investors. However, by the end of the month, major indexes posted monthly gains with the exception of the Russell 2000, which lost over 2.0%. Technology shares continued to climb as the Nasdaq climbed 2.50% in May over April and has risen over 15% since the start of the year. Despite terrorist attacks, mundane oil prices, a rocky first quarter in Washington, and a slowdown in economic growth, U.S. stocks closed the month in positive territory, spurred by generally favorable quarterly corporate earnings reports. May saw the Dow and S&P 500 post monthly gains for the second consecutive month, while the Nasdaq increased in value for the seventh month in a row. Long-term bond prices rose in May over April, evidenced by the falling yield on 10-year Treasuries.
Employment: The employment sector picked up the pace in April following a weak March. There were 211,000 new hires in April in contrast to March’s revised total of only 79,000. For April, employment growth occurred in leisure and hospitality (+55,000), food services and drinking places (+26,000), health care and social assistance (+37,000), and professional and business services (+39,000). The unemployment rate dipped to 4.4% — the lowest rate since May 2001. Over the year, the unemployment rate has declined by 0.6 percentage point, and the number of unemployed has fallen by 854,000.
FOMC/interest rates: The Federal Open Market Committee conceded that consumer spending may have slowed in the first quarter, prompting the Committee to leave interest rates unchanged at 0.75%-1.00%. However, labor has remained strong, nearing full employment, while a dip in consumer spending and consumer prices was deemed transitory by the Committee. Continued strength in employment and increases in consumer spending and inflation next month may prompt the FOMC to consider a rate increase when it next meets in June.
GDP/budget: Expansion of the U.S. economy slowed over the first three months of 2017. According to the Bureau of Economic Analysis, the first-quarter 2017 gross domestic product grew at an annualized rate of 1.2%. The fourth-quarter 2016 GDP grew at an annual rate of 2.1%. The first-quarter GDP reflected positive contributions from nonresidential fixed investment, exports, residential fixed investment, and personal consumption expenditures that were partly offset by negative contributions from private inventory investment, federal government spending, and state and local government spending.
Source: Forefield Financial Communications.
Notes: The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. Market indexes listed are unmanaged and are not available for direct investment.