Morning Reads

Morning Reads




There's a famous adage on Wall Street called "Sell in May and go away," but investors are analyzing if the strategy still holds any merit. The investment approach posits that stocks tend to underperform in the six months through October, so investors should convert to cash at the start of May and then buy into a dip later in the fall. The origins of the saying go back quite a while, with reasons ranging from vacation cycles to bonus allocations, and others noting that the worst market crashes of 1929 and Black Monday in 1987 occurred during this period.

Thought bubble: Many academic papers and market research have been written on the subject, with breakdowns by stock class or time periods. While seasonal patterns do exist, and equities could face some increased risk in the summer months, they still tend to go up over the long term despite additional volatility. Staying fully invested could prove safer than trying to time the market in any given year, and there are countless indicators out there for better portfolio decisions, such as earnings, valuations, and the direction of interest rates.

"The 'Sell in May and go away' adage has a weak track record over the past 40 years, with the S&P 500 having positive returns in over 75% of summer periods," writes Lawrence Fuller, Investing Group Leader of The Portfolio Architect. "The S&P 500 has historically finished the year higher when the first four months posted a gain, supporting a continuation of the bull market."

Unconvinced? If anything, bears have been pointing to the outsized market gains seen since late October and the latest top hit in late March. In only five months, the S&P 500 Index (SP500) soared nearly 28% to hit a peak of 5,264, before slumping 4% in April. Dip buyers may still be waiting for the too-far, too-fast rally to fizzle before inching back into the market, especially given a new period of inflation uncertainty, slowing consumer spending and GDP, and signs of waning risk appetite. (5 comments)

Lack of progress

Recent data showing higher-than-desired inflation means it will take more time for the Fed to gain confidence that price pressures are sustainably easing. That was the main message coming out of Jay Powell's FOMC presser on Wednesday, where he dismissed talk of stagflation after the central bank maintained its key interest rate at 5.25%-5.50% for the sixth consecutive meeting. The FOMC also decided to ease quantitative tightening by slowing the pace of its balance sheet runoff, pushing Treasury yields lower. "Powell adopted a more dovish tone," noted SA analyst Christopher Robb, but also "expressed confidence that long-term inflation expectations are anchored." (35 comments)

Industry heavyweight

It's hard to trade earnings. Shares of Novo Nordisk (NVO) fell more than 3% in premarket trading despite an outlook boost on the back of strong Q1 results. The performance was driven by increased demand for Novo's blockbuster GLP-1 weight-loss drugs Ozempic and Wegovy, which have taken the industry by storm and sent the stock flying. The Danish drugmaker still faces stiff competition in the weight-loss drug market from Eli Lilly (LLY), which has seen surging demand for its GLP-1s. Novo also warned of continued pricing pressures on its diabetes and obesity drugs, as well as supply constraints and shortages. (9 comments)

Big Oil gets bigger

M&A activity in the Permian Basin is progressing, with the FTC poised to approve Exxon Mobil's (XOM) $60B purchase of Pioneer Natural Resources (PXD) after the companies agreed to minor concessions. The approval is likely within days, but it will reportedly be conditioned on Pioneer founder and former CEO Scott Sheffield not joining Exxon’s board as planned. The all-stock deal was announced in October and would make Exxon the most dominant producer in the region. Pioneer is the Permian's largest operator at 9% of gross production, while Exxon is no. 5 at 6% of gross production. (14 comments)

Today's Markets

In Asia, Japan -0.1%. Hong Kong +2.5%. China -0.3%. India +0.2%.
In Europe, at midday, London +0.4%. Paris -0.7%. Frankfurt +0.1%.
Futures at 7:00, Dow +0.5%. S&P +0.7%. Nasdaq +0.9%. Crude +0.6% to $79.50. Gold -0.2% at $2,306.80. Bitcoin +0.3% to $57,822.
Ten-year Treasury Yield -3 bps to 4.61%.

Today's Economic Calendar

Auto Sales
7:30 Challenger Job-Cut Report
8:30 International Trade in Goods and Services
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Big Tech earnings wind down with Apple (AAPL): Looking for GenAI.

IPOs on watch as Viking (VIK) debuts 10% above IPO pricing level.

UnitedHealth (UNH) CEO confirms $22M ransomware payment.

Earnings miss, but NYCB (NYCB) soars on new financial targets.

Tesla (TSLA) pulls back on gigacasting ambitions after cost cuts.

Embraer (ERJ) explores making planes to rival Boeing and Airbus.

Shorts may be put to the test as Carvana's (CVNA) stock drives higher.

More chip earnings: Qualcomm (QCOM) beats, gives strong outlook.

Pfizer (PFE) raises full-year guidance amid major cost savings push.

J&J (JNJ) seeks $6B settlement to resolve talc-related cancer claims.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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