| NEW YORK
NEW YORK May 10 With the Dow and the S&P 500
setting another string of record closing highs this week, the
old Wall Street adage "Sell in May and Go Away" is starting to
Closing out the second week of May, the Standard & Poor's 500
index is up 2.3 percent for the month.
For the year, the benchmark S&P 500 is up a stunning 14.6
Some analysts say that when the market starts off this
strong, it tends to keep the upward momentum going until the
end of the year.
"Instead of 'Sell in May and Go Away,' we may be setting up
for a surprise May rally," said Ryan Detrick, senior technical
analyst at Schaeffer's Investment Research in Cincinnati, Ohio.
"What's encouraging is that small-cap stocks have been
outperforming the market recently. It's a sign that the market
is going for even the riskiest sectors."
Both the Dow industrials and the S&P 500 topped major
milestones for the first time in early May, with the Dow Jones
industrial average surpassing 15,000 and the S&P 500
breaking through the 1,600 mark. Since then, the indexes
have been steadily holding above the landmark levels. The Nasdaq
Composite Index has climbed to the highest closing
levels in 12-1/2 years.
In a sign of the rally's breadth, the Russell 2000 index
of mid- and small-cap stocks also hit all-time highs
Technical analysts say the next level to watch would be
1,660 on the S&P 500.
"The main question is whether the bulls can maintain the
1,600 level on the S&P 500 for another week," said Ari Wald,
technical analyst at PrinceRidge Group, a New York-based
"If it does, the next level is 1,660. But with markets
already this high, it won't be easy."
Despite lingering concerns about a technical pullback, the
market's strong performance so far this year has also increased
the chances of equities rallying throughout the year, according
to some analysts.
"With the market up so much, can it continue to make gains
over the next seven months through year end? At least based on
history, it has a better chance of continuing higher during
strong years than when it is not up significantly," Bespoke
Investment Group analysts wrote in a note to clients.
Bespoke noted that this year is only the 11th-best start to
a year since 1991, when the index gained another 9.7 percent for
the rest of the year.
If 2013 plays out like that - with another 9.7 percent gain
in store for the S&P 500 - the broad index would finish the year
up a whopping 24.3 percent.
LAGGARDS PLAY CATCH-UP
Among recent gainers, sectors closely tied to economic
growth such as technology and financial stocks have been
catching up after lagging for most of the year.
"We are seeing the once beaten-down stocks making a
comeback," Wald said. "It's been sort of a rotation of
leadership that has been taking place for a month or so. It will
be interesting to see if this can last" into next week.
The S&P financial sector index is up about 2 percent
for the month, while the S&P information technology sector
is up about 3 percent.
For some perspective, the tech sector has a way to go, when
compared with defensive sectors like utilities. The S&P utility
sector index is up more than 13 percent for the year,
while the S&P info tech sector index is up less than 8 percent.
CONSUMER IN THE DRIVER'S SEAT
The American consumer will get Wall Street's attention next
week when a raft of economic data and retailers' earnings could
shed some light on whether they shopped for more than just the
Retail sales for April will be released on Monday by the
U.S. Commerce Department.
"It (retail sales) will be a chance to look at the real
picture after weak numbers last month on sequestration and other
(external) factors," said Karyn Cavanaugh, market strategist at
ING U.S. Investment Management in New York.
"The market is driven by good fundamentals from corporate
earnings, but it's really the consumers that take up 70 percent
of our economy. They are a real game changer."
Other economic data on tap includes April import and export
prices on Tuesday, followed on Wednesday by the U.S. Producer
Price Index for April, the Empire State Index for May,
industrial production and capacity utilization for April, and
the National Association of Home Builders Index for May.
On Thursday, the economic agenda includes the U.S. Consumer
Price index for April, housing starts for April, weekly jobless
claims and the Philadelphia Fed's survey for May.
Wall Street will get a look at consumer sentiment on Friday,
when the Thomson Reuters/University of Michigan Surveys of
Consumers will release its preliminary reading for May.
On the earnings front, a number of retailers are scheduled
to report results, including Macy's Inc on Wednesday.
Results from J.C. Penney Co Inc, Nordstrom Inc,
Kohl's Corp and Wal-Mart are expected on
With 89 percent of the S&P 500 companies having reported
earnings so far, 66.7 percent have topped profit expectations,
above the average of 63 percent since 1994. However, only 46.4
percent have beaten revenue expectations, well under the average
of 62 percent since 2002.
(Wall St Week Ahead runs every Friday. Questions or comments
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