We are now heading into the tail-end of month-end rebalancing, before the US stock market will be close for a public holiday next Monday, 31 May. The major US stock indices remained firm in yesterday’s session, with exception of the technology-heavy Nasdaq 100, as leadership has been centred around cyclical/value and small-cap stocks.
The Dow Jones Industrial Average rallied by +0.41% to 34,464; just 1.8% away from its recent all-time high of 35,091 on 10 May. Due to an underperformance from big tech stocks, the S&P 500 ended with a smaller return of +0.12% to 4,200; 0.8% away from its recent 4,238 all-time high on 7 May. The Russell 2000 shone among the pack with a gain of +1.06% to close at 2,273, still 3.73% away from its 2,360 all-time high from 15 March. In contrast, the Nasdaq 100 declined by -0.33% to 13,657; 3% away from its 14,073 29 April all-time high. Their respective monthly performances for May as at yesterday’s close (27 May) are as follows: S&P 500 +0.47%, Dow Jones +1.74%, Nasdaq 100 -1.46% and Russell 2000 +0.29%. The age-old “sell in May and go away” adage does not seem to be in force this year.
On key economic data releases, the US labour market has continued to show improvement with initial jobless claims for the week ending 22 May decreasing by 38,000 to 406,000 its lowest claims level since 14 March 2020. The second estimate reading of US Q1 remained unchanged from the previous advance estimate of 6.4%. US president Joe Biden’s additional fiscal stimulus package of US$1.7tn seems to be gaining traction in bipartisan support as Senate Republicans confirmed a US$928bn infrastructure counter offer package.
Asia stocks have remained in an upbeat mood so far in general today, extending the rally seen in global equities for a seventh day. Japan’s Nikkei 225 led the pack with a gain of +2.11%, while the semiconductor-sensitive South Korea’s KOSPI 200 and Taiwan’s TAIEX have posted stellar returns of +1% and +1.63% respectively.
Singapore and Australia, which are under current Covid-19 lockdown restrictions, have performed positively, as seen in their respective benchmark indices; the Straits Times Index is up 0.63% and the ASX 200 is 1.13% higher, a whisker away from its all-time high level of 7,197 on 20 February 2020. Hong Kong’s Hang Seng Index is up 0.63%, while China CSI 300 remains almost unchanged.
On the commodities front, WTI crude oil futures have started to stage a bullish breakout above a key major resistance level of $66.60 per barrel, which has been in place since April 2019, ahead of the Opec+ meeting on 1 June. A weekly close above $66.60 may unleash a multi-month impulsive upwards move. This would mean the US Federal Reserve needs to think hard about a communication strategy on how to allow the economy to run hot, but not to stoke heightened inflation fears, which could trigger a liquidity squeeze via negative feedback loops in risk assets in the second half of 2021. The next major resistance stands at the $75.70-$87.00 per barrel level.
Chart of the day – Crude Oil West Texas
There is a potential impending major bullish breakout in WTI crude oil.