US equities closed May with another move lower, the fourth in a row this week making May the worst on record in 9 years and the second worst since the 1960s. The Nasdaq closed May down a whopping 8.34%, only 1.64% away from correction territory and the S&P 500 suffered a 6.5% pullback as well. The Dow Jones closed May with six weeks of losses in a row, the most since 2011.
Many factors contributed to the rout in May, starting with the ongoing US China trade war that seems no were near a resolution point, then, profit taking after the 5% move up in April making 2019 gains then at over 16%, the FED not signaling any move lower in interest rates and finally global slowdown signals from the EU and China. The new imposed tariffs by US President Trump on Mexico yesterday just inserted more instability and confusion in the already shaken markets. A bunch of leading stocks traded sharply lower on the Mexico news, staring with car makers down 3.8%, railways and appliance producer Whirlpool also took a 4% plus dive.
Weak numbers from giant retailer Costco and weakness in the technology sector contributed to the red close as well.
The 10-year treasury yield took the biggest slide in 5 years this week, signaling recession fears that are already pricing in 2 rate cuts this year without any hint from the FED that it will take the path. Adding to the turmoil was the biggest move lower in crude since November, down nearly 6% yesterday and 18% lower for the month of May, bringing the biggest winners for 2019 until April 30th, the Nasdaq and Oil to nearly halving their profits for 2019. Nothing changed for FX investors this week, the dollar domination continued over the Euro and Sterling, while the MXN fell victim to the trade war yesterday, down more than 2.5% versus the dollar.
June looks to be at this point a continuation of May pending US China trade war resolution.
The Fed is meeting on the 19th of June, lots of time for it to digest the global markets till then.