After rallying 12.9% and 11.1% in April, the
Dow Jones Industrial Average,
respectively, each finished their best month in 33 years. But the momentum faded the first day in May, as all three major indexes tumbled into the red.
The Dow declined 622.03 points, or 2.55%, to finish at 23723.69. The S&P 500 lost 81.72 points, or 2.81%, to close at 2830.71, and the
fell 284.60 points, or 3.20%, to end at 8604.95.
Investors might be spooked by tensions flaring up between the U.S. and China. The Office of the Director of National Intelligence, which coordinates the work of 17 U.S. spy agencies, said in an unusual public statement that U.S. intelligence are investigating whether or not the coronavirus outbreak was the result of a laboratory accident in Wuhan, China.
The organization said that intelligence agencies concur the broad scientific consensus that the Covid-19 virus was not man-made or genetically modified. President Donald Trump threatened to impose tariffs to retaliate against Beijing over its handling of the pandemic.
Latest economic data also offered more clues on how the coronavirus pandemic has impacted American businesses. The Institute for Supply Management’s Manufacturing Purchasing Managers’ Index fell to 41.5 points in April, from 49.1 in the prior month. While the headline reading came better than what economists had expected, the new orders and production components of the survey showed the steepest declines, to 27.1 and 27.5, respectively. Levels below 50 signify a contraction.
Earnings continued to drive many of Friday’s individual stock moves.
(ticker: AAPL) stock fell 1.6%—despite better-than-expected first-quarter earnings—after the company said it will not issue second-quarter financial guidance due to coronavirus-spurred uncertainty.
(AMZN) has seen a surge in demand and revenue as home-bound consumers are reliant on online shopping. Still, the stock dropped 7.6% on Friday as first-quarter profits came in lower than expected on the back of higher spending. CEO Jeff Bezos warned that the company expects to spend heavily in the second quarter due to Covid-19-related expenses, such as getting products to customers and keeping employees safe.
Both stocks weigh heavily in the S&P 500 due to their massive market caps, and their fall today weighed on the index’s Friday performance.
Looking past the headlines, though, the market’s fall on Thursday and Friday might be simply indicating investors’ fatigue from the recent relief rally. Market has recovered much ground from the late-February and early-March selloff, although the pandemic still looms large and many states remain under a shutdown. Stock valuations are flying high, as earnings prospects shrink, but equity prices didn’t follow. The market might be simply due for some reversion to the mean.
The seasonality doesn’t help either. Statistically, the S&P 500 and Dow have each gained an average of about 5% during the November-to-April period since their inceptions, but only 2% from May through October—a historical tendency that’s coined the Wall Street adage “sell in May and go away.”
Some investors may have done just that today.
Write to Evie Liu at firstname.lastname@example.org