Markets close May on winning streak
NEW YORK – Wall Street sealed the third month of its spring rally with a huge advance. The fourth month looks a little less certain.
Stocks shot higher right before the closing bell Friday after fluctuating on a mix of economic data. Analysts said the surge was the work of short-sellers who had bet that stocks would fall and then had to rush to buy when those bets turned out to be wrong.
A jump in commodities prices, which came on expectations that an improving economy will lift demand for raw materials, also fed the advance.
The Dow Jones industrial average closed the week up 223.01, or 2.7 percent, at 8,500.33. The Standard & Poor’s 500 index rose 32.14, or 3.6 percent, to 919.14. The Nasdaq composite index rose 82.32, or 4.9 percent, to 1,774.33.
The Russell 2000 index, which tracks the performance of small company stocks, rose 23.96, or 5 percent, for the week to 501.58.
Friday’s big win gave the major market indexes their third straight monthly gain and longest winning streak since October 2007. But May was the shakiest month of the spring rally that started in early March with the first signs that the economy’s slide was slowing. When trading resumes Monday, investors are expected to show more of their recent skepticism about how strong the recovery will be once the recession has ended.
New worries are weighing on investors including climbing interest rates and a weaker dollar. Crude oil prices recently hit a six-month high above $66 a barrel, while the dollar on Friday sank to its lowest level in months against the euro and British pound.
Some analysts say these developments are simply the consequence of a recovery in the economy and the financial markets, but others say the trends could threaten the economy’s health in the long term.
Another more short-term obstacle is General Motors Corp.’s expected bankruptcy filing on Monday. The market has been factoring in the likelihood of a GM bankruptcy for months, but investors still are unsure what the fallout might be for auto suppliers and other companies.
“Technically, the market is looking quite good,” said Peter Cardillo, chief market economist at the brokerage house Avalon Partners Inc. “Although, I suspect we’ll probably stay within this trading range for another couple of weeks.”
Wall Street’s advance since it hit 12-year lows on March 9 has been stunning, even with the unsteadiness the market has shown in May.
The Dow is up 29.8 percent, while the S&P 500 index is up 35.9 percent and the Nasdaq is higher by 39.9 percent.
Even with those gains, stocks are still down from their peak in October 2007, two months before the start of the recession. The Dow is off 40 percent, the S&P 500 index is lower by 41.3 percent and the Nasdaq is down by 37.9 percent.