US equities ended May about flat, tumbling early in the month but making up that lost ground later on. The S&P 500 eked out a monthly gain of 0.2% after being down as much as 5.5%, while the Dow Jones Industrial Average edged up 0.3%. Both the Russell 1000 and Russell 2000 finished the month right around the unchanged mark. Though the NASDAQ ended up 1.9% lower, the growth-heavy index bounced back from an 8.6% decline early on in May. Year to date, the Dow is down 8.4%, the S&P 500 is 12.8% lower, and the NASDAQ continues residing in bear market territory, down 22.5%.
Energy was the biggest winner in May, closing the month 16% higher while the other ten sectors were evenly split between positive and negative. Utilities rose 4.3%, the most of any other sector, while Consumer Discretionary’s 5.1% decline lagged all others, marking another contrast in recent performance between defensive and cyclical sectors.
Believe it or not, the inflation rate declined for the first time in seven months, down to 8.26% per April data. However, some areas of the economy, and notably the real estate sector, couldn’t ignore the fact that inflation remains at 40-year highs. Sales for new single-family homes plunged 16.6%, and existing home sales were down for the third straight month as well. May 2022 also set a new high for pain felt at the pump, with US Retail Gas Prices reaching a record $4.73 per gallon.
Short and long-term interest rates increased significantly in May, but yields on all medium-term treasury notes declined. The rate on 1-Month T-Bills nearly doubled over the course of the month to 0.73%, while the 3-Month T-Bill rate surpassed 1% for the first time in over two years, closing out May at 1.16%. Accelerated rate hikes by the Federal Reserve have been the primary driver of short-term interest rates. 20-Year and 30-Year Bonds were both above 3% at May’s end, yielding 3.28% and 3.07% respectively. With the exception of those 30-Year and 20-Year rates, the yield curve became more normalized in May.
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