A big second quarter for stocks, but it was front-loaded
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Wall Street got the continued bounce the bulls wanted to see in the second quarter ended Tuesday. But most of the progress occurred in the first six weeks of the quarter. Since then, stocks overall have been treading water.
That old line about ‘sell in May and go away’ isn’t looking like a bad call, after all.
The Standard & Poor’s 500 index jumped 15.2% in the three months, the biggest advance for any calendar quarter since 1998.
Indexes of smaller stocks, including the S&P small-cap and the Russell 2,000, were up more than 20% in the quarter as the market sectors that were down the most in the fall and winter sell-offs snapped back.
But it won’t look like much of a market recovery to someone who’s just measuring the changes in major indexes from Dec. 31 to Tuesday.
The S&P 500 was up a mere 1.8% in the first half, not including dividends. Ditto for the Russell 2,000. And the Dow Jones industrial average, up 11% in the second quarter, failed to recoup all of its first-quarter losses. It was down 3.8% in the half.
The spring rally began to sputter in the first week of May. Although the S&P 500 reached an eight-month closing high of 946.21 on June 12, it finished the quarter 1.1% below its close on May 8.
Why the stall? Many investors clearly aren’t persuaded that those economic ‘green shoots’ of spring will amount to enough to justify pushing share prices higher. And measured from the 12-year low reached March 9, the S&P 500 is up 36% -- for some investors, reinforcing the feeling that if you missed it, you missed it.
Trading volume has mostly trailed off since early May, another sign of loss of interest.
Still, Wall Street optimists take heart that the market has been able to largely hold on to its gains, even in the face of rising oil prices.
They also note that the strongest sectors of the market in the second quarter were consistent with the idea that investors retain their faith in an economic turnaround in the second half.
The technology-heavy Nasdaq composite index, for example, rose 20.1% in the quarter and was up 16.4% in the first half. Tech companies could be prime beneficiaries of any rebound in business and consumer spending.
Transportation stocks, another economy-sensitive sector, also had a big bounce in the quarter.
The challenge now will be for the economic data in the next few months to live up to bulls’ expectations.
‘The second half is going to be the most data-driven market we’ve seen’ at least in this decade, said Nicholas Colas, chief market strategist at brokerage BNY ConvergEx in New York.
Somehow, that doesn’t sound like something to look forward to.
-- Tom Petruno