5 Best Performing Stocks Of May

Markets notched up gains once again last month, with tech stocks leading the pack. Indications emerged that the Fed was going to trim its balance sheet even as investors prepared for rate hikes. Meanwhile, the Trump trade petered out even as the President dismissed the FBI director and released budget proposals which were mostly in line with expectations.

The OPEC-led output cut deal received an extension which failed to boost oil prices. At the same time, economic data remained mixed even as GDP figures experienced an upward revision.

May’s Performance

For the month, the Nasdaq, S&P 500 and Dow advanced 2.5%, 1.2% and 0.3%, respectively. During the month, the Federal Open Market Committee released minutes which indicated that Fed officials were in favor of trimming down the central bank’s $4.5 trillion balance sheet.

The Trump administration released its budget proposal which seeks to cut federal spending by $3.6 trillion with a focus on balancing the budget over the next decade. Moreover, Trump discharged Director of the Federal Bureau of Investigation (FBI), James Comey from office. Meanwhile, U.S. auto industry reported disappointing sales in April, with sales hitting 16.88 million, below an expected annual rate of 17.2 million.

Mixed Domestic Data

Economic reports released in May were mostly mixed in nature. The ISM manufacturing index experienced a decline in April Construction spending contracted while factory orders increased at a slower pace than in February. Additionally, consumer confidence declined from 119.4 in April to 117.9 in May. Retail sales increased at a faster pace in April, even though it came in under estimates. The ISM services index notched up gains for the 88th consecutive month.

In contrast, industrial production recorded a growth of 1% in April, marking its largest increase since February 2014. The leading indicators index increased by 0.3%. Consumer spending increased at its fastest pace since Dec 2016 in April even as incomes continued to rise. Both CPI and PPI moved higher. But even though PCE inflation increased by 0.2%, the annual rate slowed to a 1.7% gain, lower than the pace recorded in March and well below the Fed’s target of 2%.

Q1 GDP Revised Upward

As per the "second" estimate released by the Bureau of Economic Analysis, real gross domestic product (GDP) increased at an annual rate of 1.2% in the first quarter of 2017. It also beat analysts’ estimate of 0.9% and was an improvement over Q1’s gain of 0.8%. Moreover, corporate profits increased 3.7% year over year in the first three months of 2017, despite falling 1.9% from the fourth quarter of last year.

Additionally, after a temporary pullback, both consumer spending and business investment gained traction. Consumer spending, which accounts for a bulk of U.S. economic output, was revised upward from the preliminary reading of 0.3% to 0.6% in the second estimate. Also, business investment rose 11.9% in the first quarter, which is better than the previous estimate of 9.4%.

Housing Sector Recovery Stutters

The U.S. housing sector recovery remained on track despite the release of discouraging data on the sector. Housing starts declined 2.6% to an annual rate of 1.17 million while building permits also moved 2.5% lower. Existing-home sales declined 2.3% in April to a seasonally adjusted annual rate of 5.57 million, lagging the consensus estimate of 5.65 million.

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