Good Friday evening to all of you here on r/stocks! I hope everyone on this sub made out pretty nicely in the market this month, and are ready for the new trading month of May. :)

Here is everything you need to know to get you ready for the trading week beginning May 1st, 2023.

Dow gains more than 250 points Friday as index finishes best month since January: Live updates - (Source)

The Dow Jones Industrial Average rose on Friday, notching its best month since January.

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The blue-chip index closed 272 points, or 0.8%, higher at 34,098.16. The S&P 500 added 0.83% to finish at 4,169.48. The Nasdaq Composite advanced 0.69% to end at 12,226.58 as investors parsed the latest crop of technology earnings.

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The Dow finished April 2.5% higher, its best monthly showing since January, when the average ended up 2.8%. The S&P 500 logged a 1.5% monthly gain — its second positive month in a row — while the Nasdaq ended the month only slightly higher.

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On a weekly basis, the Nasdaq saw the largest gain, at 1.3%, in what was considered Big Tech’s marquee earnings week. The Dow and S&P 500 each finished the week about 0.9% higher.

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Just over half of S&P 500 companies have reported earnings thus far. Of those companies, 80% have beaten expectations, according to data from FactSet. That beat rate is roughly in line with a three-year average, according to data from The Earnings Scout.

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“The market should follow earnings,” said Gina Bolvin, president of Bolvin Wealth Management. “That is the mother’s milk of the market.”

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Amazon shares closed down nearly 4%. When reporting first-quarter results, the online retailer said its cloud business decelerated, though it did beat Wall Street’s expectations for revenue in the quarter.

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Snap tumbled 17% following a revenue miss. Pinterest shares dropped 15.7% after issuing disappointing second-quarter revenue growth expectations. First Solar slid more than 9% after missing Wall Street expectations for the first quarter.

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Not every tech stock was down following their respective releases. Intel shares climbed 4% after the semiconductor firm beat estimates on the top and bottom lines.

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Data released Friday morning showed the personal consumption expenditures price index rose 0.3% in March, which was in line with economist expectations. The index is a key gauge of inflation for the Federal Reserve, which has a policy meeting scheduled for next week.

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“Today is reflective of sort of a three-legged stool,” said Greg Bassuk, CEO of AXS Investments. “Earnings, economic data and the Fed continue to be the investor narrative.”

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Also of note, shares of troubled First Republic Bank plunged more than 43% after CNBC’s David Faber reported that the most likely outcome for the regional bank is the Federal Deposit Insurance Corporation taking receivership. The stock has lost more than 97% of its value since the start of the year.

This past week saw the following moves in the S&P:

(CLICK HERE FOR THE FULL S&P TREE MAP FOR THE PAST WEEK!)

S&P Sectors for this past week:

(CLICK HERE FOR THE S&P SECTORS FOR THE PAST WEEK!)

Major Indices for this past week:

(CLICK HERE FOR THE MAJOR INDICES FOR THE PAST WEEK!)

Major Futures Markets as of Friday's close:

(CLICK HERE FOR THE MAJOR FUTURES INDICES AS OF FRIDAY!)

Economic Calendar for the Week Ahead:

(CLICK HERE FOR THE FULL ECONOMIC CALENDAR FOR THE WEEK AHEAD!)

Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:

(CLICK HERE FOR THE CHART!)

S&P Sectors for the Past Week:

(CLICK HERE FOR THE CHART!)

Major Indices Pullback/Correction Levels as of Friday's close:

(CLICK HERE FOR THE CHART!)

Major Indices Rally Levels as of Friday's close:

(CLICK HERE FOR THE CHART!)

Most Anticipated Earnings Releases for this week:

(CLICK HERE FOR THE CHART!)

Here are the upcoming IPO's for this week:

(CLICK HERE FOR THE CHART!)

Friday's Stock Analyst Upgrades & Downgrades:

(CLICK HERE FOR THE CHART LINK #1!)

(CLICK HERE FOR THE CHART LINK #2!)

Everything You Ever Wanted to Know About Sell In May

Buckle up, as one of the most well-known investment axioms is nearly here, the ‘Sell in May and Go Away’ period, otherwise known as Sell in May. This gets a ton of play in the media, as these six months are indeed the worst six-month combo out of all scenarios, while stocks also did quite poorly last year during this timeframe as well, only adding to the likely hype.

(CLICK HERE FOR THE CHART!)

The thinking is you are better off to simply ignore these six months and go away. Turns out, from May through October the S&P 500 is historically quite weak, up only 1.7% on average and higher less than 65% of the time, making it indeed the worst combo.

Of course, 1.7% is still a positive return, so maybe we shouldn’t just blindly go away? That is our take and there are other reasons not to fear these worst six months in 2023. Sure, more volatility and scary headlines could happen, but with overall market sentiment extremely bearish and the economy on firmer footing than most think, we’d use any seasonal weakness as an opportunity to add to core positions.

Here’s something I bet most investors don’t know, May has been really strong lately for stocks, higher an incredible nine of the past 10 years. Maybe we should call it Sell in June?

(CLICK HERE FOR THE CHART!)

Let’s take a closer look at that one year over the past decade that stocks fell in May. Turns out, one potential hiccup is May is the second worst month of the year for stocks during a pre-election year, with only September worse. In fact, these are the only two months with a negative return during a pre-election year, with May down 0.1% and September down 0.7%. Even in the bullish 2019 (when stocks gained close to 30%), stocks still lost more than 6% in May of that year.

(CLICK HERE FOR THE CHART!)

Last year was a great time to sell and go away during these historically weak six months, but that wasn’t always the case. In fact, over the past decade, stocks only fell twice these six months, last year and 2015. Looking at the past decade shows that these six months have been up nearly 5% on average versus the 1.7% return going back to 1950.

(CLICK HERE FOR THE CHART!)

We’ve noted many times the past several months how historically strong pre-election years were for stocks, well, what about Sell in May in a pre-election year? As you can see below, the returns are right about average, up 1.8% during these six months in a pre-election year. What stands out more to me is how poorly these six months are during a midterm year, playing out well last year for sure.

(CLICK HERE FOR THE CHART!)

Now here’s where things get quite interesting. It turns out how things are going heading into these six months can often give a clue what might happen. When stocks are down year-to-date heading into these six months the return drops to 2.3% and is higher less than a coinflip of the time. Given this was the scenario last year, along with a midterm year, maybe a rough time wasn’t such a surprise? Now the good news is when stocks are up for the year (like 2023), these worst six months actually gained more than 4% on average and were higher more than 75% of the time. This could bode well for potentially better returns these six months in 2023.

(CLICK HERE FOR THE CHART!)

May’s First Trading Day: S&P 500 Higher 72% of the Time

(CLICK HERE FOR THE CHART!)

Next Monday, the first trading day of May, has a bullish history over the past 25 years. DJIA, S&P 500 and NASDAQ have all averaged around 0.4% on the day. S&P 500 has the best track record, up 18 times or 72% of the time since 1998. With an average gain of 0.22%, Russell 2000 is slightly weaker. May’s first trading day’s worst loss was in 2020. DJIA and S&P 500 shed over 2.5% while NASDAQ and Russell 2000 dropped over 3%.

(CLICK HERE FOR THE CHART!)

"Big" Winners

Whenever you see a list of best-performing stocks, it’s inevitably loaded with many small stocks that most investors have never heard of. This year, though, it’s practically been the opposite trend as the two top performing stocks in the S&P 500 on a YTD basis – Meta Platforms (+96%) and Nvidia (+88%)- are not only household names but they also have market caps of more than $500 billion. We’d also note that both stocks are also more than 30 percentage points ahead of the next closest stocks in terms of top YTD returns.

With such strong returns among the largest stocks in the S&P 500, the YTD performance spread between the market-cap-weighted S&P 500 and its equal-weighted counterpart is among the widest ever seen on a YTD basis through the end of April. Through Friday afternoon, the market-cap-weighted S&P 500 was up 8.26% while the equal-weighted index was up just 2.13%. At 6.14 percentage points, the YTD performance gap between the two indices is the second widest since 1990 trailing only the 6.8% percentage point gap in 2020. Besides 2020, the only other year where the gap was wider than two percentage points was in 1997. While it’s a small sample size and history doesn’t always repeat itself, we’d note that the S&P 500’s rest-of-year performance was a gain of over 20% in both of those years. Just saying.

Besides the two other years where the performance gap was significantly wide like this year, what stands out about the chart below is how common it has historically been for the market cap-weighted index to underperform the equal weight index in the first four months of the year. Including this year, the cap-weighted index has only outperformed nine times in the last 34 years.

(CLICK HERE FOR THE CHART!)

10 Weeks of Bearish Sentiment

As the S&P 500 broke down to the lowest levels of April this week, bullish sentiment according to the weekly AAII survey came in at a new short-term low. After rising to 27.2% last week, only 24.1% of respondents reported as bullish this week, the lowest reading since the end of March.

(CLICK HERE FOR THE CHART!)

That resulted in rising bearish sentiment which rose 3.4 percentage points to 38.5%. Conversely, to bullish sentiment, that is the highest reading since the end of March.

(CLICK HERE FOR THE CHART!

With inverse moves in bullish and bearish sentiment, the bull-bear spread has fallen deeper into negative territory meaning bears continue to outnumber bulls, and by a wider margin, although nowhere near the degree as levels seen in 2022.

(CLICK HERE FOR THE CHART!)

As we noted throughout 2022 and earlier this year, bears have consistently outnumbered bulls. In fact, this week marked the tenth in a row in which the bull-bear spread was negative. While that is one of only a handful of other streaks lasting for ten or more weeks going back through the history of the survey, it comes on the back of the record 44-week streak that ended this past February. That was only shortly after another 12-week streak ending in March of last year and the second longest streak on record (34 weeks long) that ended in the fall of 2020. In other words, the story remains in which sentiment has been unshakably bearish.

(CLICK HERE FOR THE CHART!)

Some Improvement in Claims

The latest week's jobless claims data fell down to 230K from the previous week's upward revision to 246K. That 16K decline was the largest week over week drop since the first week of the month and brings claims back down to the low end of the past couple of months' range.

(CLICK HERE FOR THE CHART!)

Before seasonal adjustment, claims were lower reaching 225.84K. That is roughly inline with the comparable weeks of last year and the few years prior to the pandemic. As shown in the second chart below, a drop in the current week of the year has very much been the norm historically. As for 2023 as a whole, unadjusted claims have remained relatively flat following the steep seasonal decline in the first weeks of the year. The potential for further seasonal strength will remain in place for the next few weeks as claims historically have reached a seasonal low in late May.

(CLICK HERE FOR THE CHART!)

Like initial claims, seasonally adjusted continuing claims also surprised with a decline this week. Continuing claims totaled 1.858 million in the most recent week, down from 1.865 million and better than the expected increase to 1.87 million. Albeit the latest week's reading was surprisingly strong, the indicator's uptrend remains firmly in place which as we noted in last week's Bespoke Report, the overall rise in continuing claims has resembled other recessionary periods.

(CLICK HERE FOR THE CHART!)

S&P 500 April Loss Historically Bearish for Rest of Year

(CLICK HERE FOR THE CHART!)

April has been the second-best performing S&P 500 month since 1950 based upon average percent gain. As of today’s close, S&P 500 is down 1.3% this April. Should S&P 500 close out April in the red, the outlook for the balance of the year diminishes notably. In the included table all S&P 500 down Aprils since 1950 appear. Performance in May, during the “Worst Six Months” (May to October), the rest of the year, and the full year is also included.

When comparing S&P 500 down Aprils to all Aprils and positive Aprils there historically has been a sizable reduction in average performance and frequency of gains following a down April. Average performance for the rest of the year after a down April was a loss of 0.49% compared to a gain of 7.30% after an up April and 5.06% after all Aprils. Full year S&P 500 performance also dropped significantly following a down April, –1.36% versus 13.31% in years with a positive April. But, with two trading days left, there is still a chance S&P 500 avoids an April loss.

May Almanac: Second Worst S&P 500 Month in Pre-Election Years

May has been a tricky month over the years, a well-deserved reputation following the May 6, 2010 “flash crash”. It used to be part of what we once called the “May/June disaster area.” From 1965 to 1984 the S&P 500 was down during May fifteen out of twenty times. Then from 1985 through 1997 May was the best month, gaining ground every single year (13 straight gains) on the S&P, up 3.3% on average with the DJIA falling once and two NASDAQ losses.

In the years since 1997, May’s performance has been erratic; DJIA up fourteen times in the past twenty-five years (four of the years had gains exceeding 4%). NASDAQ suffered five May losses in a row from 1998-2001, down –11.9% in 2000, followed by thirteen sizable gains of 2.5% or better and seven losses, the worst of which was 8.3% in 2010 followed by another substantial loss of 7.9% in 2019.

(CLICK HERE FOR THE CHART!)

Since 1950, pre-election-year Mays rank poorly, #10 DJIA, #11 S&P 500, #8 NASDAQ, #8 Russell 1000 and #7 Russell 2000. Historically bullish pre-election forces do not consistently lift May. Four of the nine S&P 500 pre-election year May declines exceeded 4%, the worst was a 6.6% loss in 2019. Russell 2000 gained 10.6% in May 2003, notably boosting its average gain and ranking.

Here are the most notable companies reporting earnings in this upcoming trading week ahead-

(T.B.A.)

(CLICK HERE FOR NEXT WEEK'S MOST NOTABLE EARNINGS RELEASES!)

(CLICK HERE FOR NEXT WEEK'S HIGHEST VOLATILITY EARNINGS RELEASES!)

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