Stocks edged lower in the final week of May as fresh news on economic growth and inflation failed to inspire investors.
Stocks Slide Markets shrugged off news that the Q1 Gross Domestic Product was revised lower to 1.3 percent from the Initial estimated 1.6 percent. Despite concerns that the economy was cooling faster than expected, investors didn’t believe the update was enough to influence the Fed’s decision about adjusting short-term rates. On Friday, investors were on edge waiting for the update on inflation. The Fed’s preferred inflation indicator, called the personal consumption and expenditures (PCE), rose 0.2 percent in April, which was in line with forecasts. Stocks rose slightly in pre- market trading on the news but were under pressure throughout the day as investors digested the inflation update. But in the last hour of trading, stock staged a powerful rally led by the Dow, which had its best day of the year.
Is Bad News Good News? On the economic front, last week's news was generally disappointing. The update on Q1 GDP was a bit discouraging, and several Fed officials gave seemingly more hawkish updates. Also, the Fed’s “Beige Book” revealed modest economic growth nationwide. Yet despite the drumbeat of bad news, stocks were resilient and closed only slightly lower for the holiday-shortened week.
This Week: Key Economic Data Monday: ISM Manufacturing Index. Construction Spending. Tuesday: Motor Vehicle Sales. Factory Orders. Wednesday: ADP Employment Report. EIA Petroleum Status Report. Thursday: Jobless Claims. International Trade in Goods & Services. Productivity and Costs. Friday: Employment Situation. Fed Official Lisa Cook speaks.
This Week: Notable Companies Reporting Earnings Tuesday: CrowdStrike (CRWD), Hewlett Packard Enterprise Company (HPE) Wednesday: lululemon athletica Inc. (LULU), DollarTree, Inc. (DLTR)
Final Thoughts Even though stocks were down slightly last week, they were up for the month of May. That’s good news. There’s a bit of economic data out this week, most notably May employment data. Bad news has been good news lately as it is believed this would put the Fed closer to cutting rates. The jury is still out on that in my opinion. With negative articles on stocks in Barron’s and The Economist, the contrarian in me says June may be a good month. Barron’s and The Economist are the worst at timing their headlines, again, in my opinion.
And now, for the elephant in the room, literally, the Trump conviction.
We are in unprecedented territory, and not in a good way. What a mess. I wrote a few months ago about P.T. Barnum and “The Greatest Show On Earth.” Well, this election and its showmen candidates are not disappointing. There are so many jokes I could make here, but frankly it is just sad. I hope I live long enough to see what history thinks of this 40-50 years from now. The bar has been lowered so much, maybe I really don’t want to know what it’ll be like in 40-50 years. Nonetheless, we are here and I guess one of these two will be elected, if that is even possible.
What I have learned over time is that if something doesn’t kill you, you become stronger. Is that the case for Trump? The U.S. has a population of 330 million people. Let’s assume a third of those are kids, there are 200 million adults and these are the best two people we have? Ugh. I have heard that pre-Labor Day polling is not reliable. Too many voters are focused on their summer holidays and not the fall political races. Plus, it is hard to figure a way to frame polling questions for an unprecedented event. As Americans are notorious for their short attention span, the landscape the first week of June may look very different in five months.
Stay tuned…
On a personal note, I apologize for the absence of this newsletter the last few weeks. Unfortunately, my dad became quite ill requiring hospitalization for a few weeks and passed away May 24th. I appreciate all the kind thoughts and prayers from everyone. He was fortunate to live a long and very healthy life until just a month ago. While one is never completely prepared for such a loss, we take solace in his faith and that he went peacefully surrounded by family. Thank you again for your kind thoughts. 
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June 04, 2024
