The U.S. stock market finished the trading session of the last day of May with the decrease in major indices. Dow Jones Industrial declined 0.67%. The broad market index S & P 500 lost 0.63% and the composite Nasdaq ended trading on Tuesday, May 31 with a loss of 0.41%.
The market was digesting last week’s rally, with a clear lack of spirit to continue the banquet amid the overhang of the inflation component and the Fed’s tightening of monetary policy. Another reminder of this was the record May inflation data in the Eurozone, which reached 8.1%, while increasing for the seventh month in a row.
Dow Jones is in no hurry to come out of the woods
Investors were mostly happy with Amazon (AMZN), which surged 4.4%, and Alphabet (GOOG), which gained more than 1%. At the start of trading oil securities were good, but an unexpected reversal of oil quotations pushed oil shares to the outsiders of the session.
Traders on NYSE. Photo: Yahoo
On Monday, and for most of Tuesday, black gold prices were fueled by European diplomacy talks on a waiver of Russian oil imports, which “successfully” ended in a general agreement. But just at the end of the day the oil picture of the world was spoiled by The Wall Street Journal that reported about possible “political” complications of Russia within the OPEC oil cartel.
As a result, oil prices instantly jumped by 2-3% from $120 per barrel. The decline in oil securities was not long in coming. The shares of Chevron (CVX), which made a new historic high of $180, lost more than 2% in the session.
A similar situation with ExxonMobil (XOM), which shares lacked just a few cents before testing the psychological level of $100 in the first hours of trading and eventually shed 1.62%. ConocoPhillips (COP), the third largest U.S. oil corporation by capitalization, lost 1.95% of its value.
Oil stocks remain a priority
of the news which has pretty much ruined the idyll in the oil stocks, I continue to be positive on these assets. First, neither the news from Europe nor the WSJ report has any concrete data to draw deep conclusions. The imposition of an embargo on Russian non-oil has no timeline for implementation, and the U.S. publication’s information is presented as having been talked about.
On topic: Will Europe give up oil from Russia? Wait until the fall. The heating season will straighten out all the politicians
Despite the increased volatility and various bearish records last month was not negative for investors by its results – the Dow and S&P were almost at their own, and the Nasdaq fell only by 2%. Although throughout May, investors could see both rising interest rates and disappointing quarterly reports from industry giants such as Walmart.
Amid the turbulent geopolitical situation on the European continent and outbreaks of what has already appeared to be a pandemic in China, the S&P took a 20% dive from its high, and on the Dow, investors witnessed the longest eight-week losing streak since as far back as 1923.
We have written before about the technological sector being very promising if the market finds the strength to pullback or even reverse. And in this situation we mentioned securities of such chipmakers as Advanced Micro Devices (AMD) and NVIDIA Corporation (NVDA). But at the same time there are objective judgments that the U.S. stock market is far from even approaching its lows.
In particular, the legendary investor Jeremy Grantham adheres to an ultra bearish position on the market, considering the bottom of the current correction at 40% of the highs of the S & P 500. Recall that the broad market is currently just over 13%, the DJI is 9.2%, and the Nasdaq is 22.7%.
Protective Stocks Against Correction
In this light, the positions of Grantham, Mayo, & van Otterloo, the asset management firm where he is co-founder and chief investment officer, are interesting. According to reports provided to the SEC, at the end of March, the largest defensive positions of the management company, weighing in at over $1.5 billion, were Coca-Cola (KO) – $580 million, U.S. Bancorp (USB) – $520 million and Johnson & Johnson (JNJ) – $457 million.