Break in stocks rally suggests turning point

THE stock market’s break in its recent rally last week left investors wondering if they’re seeing a turning point or just a blip in the upward path.

This week could make it harder to figure out, considering that the long Memorial Day weekend typically signals the start of the summer.

The three major US stock indexes posted a decline last week, their first weekly loss since mid-April, raising some fresh worries that this year’s rally may be weakening.

Among the biggest concerns for investors is how soon the Federal Reserve may be ending its stimulus programme. Minutes released last Wednesday from the Federal Reserve’s latest meeting showed some officials were open to tapering large-scale asset purchases as early as the June meeting. Volume picked up sharply in the last two days after the release.

“We should have already been prepared for the Fed’s eventual tapering of stimulus measures,” said Bryant Evans, investment adviser at Cozad Asset Management, in Illinois.

“The market is perhaps just looking for an excuse to sell off some gains. And then you throw in the ‘sell in May and go away’ philosophy, well, here we are Memorial Day weekend.”

The pickup in volume suggested to some a shift in sentiment, though activity has been below-average throughout the rally, which drove the Dow and the S&P 500 to record highs.

This week brings May consumer confidence data today and preliminary data for first-quarter gross domestic product on Thursday. On Friday, personal income and consumption data for April is set for release, along with the final reading on consumer sentiment for May from Thomson Reuters/University of Michigan, and the ISM-Chicago business survey, also known as the Chicago Purchasing Managers Index, for May.