The equity market seemed quite comfortable on Friday with its gain of nearly 3% for April (and even more if you’re partial to the Dow or Nasdaq), and ended up off its highs for the session with a modest rally.
Of course, modesty is a relative thing, and even the smaller push higher in stocks also meant another 2011 closing high for stocks – the Dow Jones Industrial Average tacked on another 47 points to 12,811, the Nasdaq gained a point to 2874 and the S&P 500 1364.
And where would we be without our standard rallies in other “hot” asset classes — notably oil, which pushed to a multiyear high above $114 a barrel before settling just under that level, and gold and silver, which both touched record and 30-year highs, respectively.
Bonds, too, continued to rally, with the yield on the 10-year Treasury note closing below 3.30% for the first time since March 18.
As one would expect, oil exploration and production companies caught a bid, many of these of the small-cap variety that have shown signs of life when crude has rallied. The Russell 2000 outperformed today with a 0.4% gain.
While small-caps were flexing their ability their momentum-sustaining muscles, tech stocks, particularly large-caps, were decidedly not. The most-active Nasdaq issue, Microsoft (NASDAQ:MSFT), slid nearly 4% on Friday after its earnings report late Thursday suggested growth forecasts for its ubiquitious Windows operating system were less than secure.
Throw in a disappointing forecast from Blackberry maker Research In Motion (NASDAQ:RIMM), and you’ve set the table for the Nasdaq 100 Index to fall 0.2%. (It’s no coincidence, of course, that both of these selloffs are a direct result to the encroaching kingdom of Apple (NASDAQ:AAPL)).
The larger takeaway, however, is that amid a broad market rally, we’ve seen two losing days in a row for the index, which has outperformed the S&P 500 by more than 5 percentage points since stocks started their serious rally at the end of late August. This may mean nothing long term, but it does suggest a higher degree of weakness in one of the rally’s main cogs.
What’s more, investors are running out of game-changing big companies to show that corporate profits are in no danger of slowing down (Sadly, Apple can only report four times a year).
It would seem logical that a declining dollar, manic precious-metal rallies and crude oil’s approach of $120 a barrel will have a larger impact on stocks next month as corporate data points begin to fade.
Under that scenario, the “sell-in-May” approach could appear the wiser move.
