Unusually Good May on Wall Street

May is usually a bad month for Wall Street as investors begin to take profits off the market ahead of the typically dead summer season, but after the S&P 500 and Dow Jones indices reached new record levels last week, this year may not be the case.

The S&P 500 index strengthened by 1.2 percent last week, reaching 1,633 points, while the Dow Jones, for the first time in history, broke above the psychologically important barrier of 15,000 points. Rising by 1 percent, it reached 15,118 points. The Nasdaq index, on the other hand, strengthened by 1.7 percent, reaching 3,436 points, the highest level in 12 and a half years.

– Instead of the usual stock sell-off and profit-taking from the market, this May could surprise us with further price increases – says Ryan Detrick, an analyst at Schaeffer’s Investment Research.

Thanks mainly to the loose monetary policy of central banks around the world, the S&P 500 index has risen by 14.6 percent since the beginning of the year.

After such strong growth, many expected a correction in stock prices in May, when investors typically begin to withdraw from the market ahead of the quiet summer season. However, this May has so far been surprisingly strong. In the first two weeks of May, the S&P 500 and Dow Jones rose more than 2 percent, reaching all-time highs.

– The question is whether the ‘bulls’ can keep the S&P index above the 1,600-point mark for another week. If they succeed, the next key level is 1,660 points. However, as the market is already very high, achieving this will be difficult – says Ari Wald, a technical analyst at PrinceRidge Group.

Recently, the market has been supported by solid quarterly business results from companies. So far, about 90 percent of companies in the S&P 500 index have reported, with 66.7 percent exceeding earnings expectations, which is above the average of 63 percent since 1994. However, only 46.4 percent of companies exceeded revenue estimates, which is below the average of 62 percent.

Although expectations were low, solid company results encourage investors. However, as the season for quarterly financial report releases comes to an end, this weakens market support.

Therefore, investors will focus more on macroeconomic data, and there will be plenty of it this week. However, the most attention will be drawn to the retail sales report in the U.S. for April, which will be released on Monday.

– This report will provide a glimpse into the real situation, considering that retail data a month ago was weak due to tax increases and budget cuts at the beginning of the year. The market is supported by good fundamentals and solid company results, but consumption accounts for as much as 70 percent of the U.S. economy, so this data will indeed be important for the market – says Karyn Cavanaugh, an analyst at ING U.S. Investment Management.