The US stock market has closed what was by some measures its worst month in two years.
Over five dismal weeks, Facebook fizzled, a debt crisis in Europe loomed and nobody was in the mood to buy. When May was mercifully over, the Dow Jones industrial average and other major indexes had erased most of the strong gains they built up through March and held on to in April.
“The sentiment has changed,” said Craig Callahan, co-founder and president of Icon Advisers in Denver. “Any time the market dips like this, it erodes some confidence. It scares people out of the market. All of the above, May has done that.”
The Wall Street adage that investors should “sell in May and go away” may not be sound strategy all the time – many financial advisers say it is foolish – but this year it looked like good advice.
The Dow lost 820 points for the month, its worst showing since May 2010. That month, investors were spooked by a one-day “flash crash” in stocks when a large trade overwhelmed computer servers.
This May, stocks limped to the finish. The Dow closed down 26.41 points to end the month at 12,393.45. It declined on all but five of 22 trading sessions. The Standard Poor’s 500 index dropped 2.99 points to close at 1,310.33. It fell 6.3% in May, its worst month since September. The Nasdaq composite index fell 10.02 points to 2,827.34, and had its worst month in two years.
On Thursday, investors latched on to a sliver of good news in the morning, as May sales from retailers like Target and Macy’s looked healthy, and sent stock futures higher.
Then the US government offered two unpleasant pieces of economic data. The number of people applying for unemployment benefits rose to a five-week high, and economic growth from January through March was slower than first thought.
Underscoring the crisis in Europe, the head of the European Central Bank, Mario Draghi, told European leaders that the set-up of the 17-country euro currency union was unsustainable “unless further steps are taken”.
The Dow was down as much as 103 points and up as much as 70 before ending slightly lower. Energy companies were the worst performers for the day and the month. The price of oil, which ended April at almost 105 dollars (£67.40), ended May at 86.53 dollars (£55.54).