Semiautomatic

Even if someone has been just semiconscious or semiliterate, they probably understand that the stock market has been hotter than a pistol through April and May. Where the initial leg of the rally off the March lows through April was especially sweet, the additional gains in May, while very tasty, were just semisweet. The S&P 500 Index (SPX) has rallied 19.5% since its late-March low thanks to an 11.8% gain in April and another 3.8% gain last month. That is the index’s largest two-month gain in six years. The NASDAQ Composite Index (COMP) is up nearly 30% from its March low, appreciating 15.3% in April and another 8.3% in May. That’s COMP’s largest two-month gain in more than 23 years.

At those March lows, both indices were showing mid-single-digit losses year-to-date (YTD). Now, just two months deeper into 2026, SPX is enjoying a YTD gain of nearly 11% while COMP is up a bit more than 16% for the year. At the sector level, the S&P Technology SPDR is now up nearly 33% YTD, following a rally of almost 50% in just the past two months. The S&P Energy SPDR stands at second-best YTD, up nearly 26%, although the sector has actually lost ground since March as crude oil prices have declined. Two of the other nine sectors, materials (+12.8%) and industrials (+11.6%), also have double-digit gains YTD.

Unfortunately, while a handful of sectors have been hard at work lifting the market averages, several other sectors have been semiretired. The S&P Financials SPDR is the most prominent laggard, down nearly 6% YTD. As a group, financials actually hit their high for the year on the second trading day in January, then slumped to about a 13% YTD loss by late-March. The Healthcare SPDR, which was down about 8% at its March low, and which actually made a slightly lower low in late April, ended May down 2.5% YTD.

The market’s flashy performance in May was really more of a semigloss. True, 10 of the S&P 500 component stocks had a gain of more than 50% for the month. That glitzy performance was more than enough to offset the fact that more than half of the S&P stocks had a loss for the month.

Both SPX and COMP closed higher in each of last week’s four trading sessions. Lower crude oil prices provided a tailwind, with front-month crude oil futures trending lower through a week with rekindled hopes for the opening of the Strait of Hormuz. Economic data brought what was likely the largest headwind of the week on Thursday when the Personal Consumption Expenditures (PCE) Price Index for April was announced. That price index, which is widely proclaimed to be the U.S. Federal Reserve’s preferred gauge of inflation, showed a 3.8% increase for the month. And that increase wasn’t all due to energy prices. The core PCE price index, which strips out food and energy prices, rose 3.3% in April.

Where impressive daily gains through April and May in the technology sector were a fairly common occurrence, for the semiconductor subsector, they were almost automatic. The NYSE Semiconductor Index (SOXX) is up 84% from its late-March low. The U.S. Listed Semiconductor 25 Index (SMH), which has a higher weighting in NVIDIA Corp. and Taiwan Semiconductor Manufacturing Co., and a lower weighting in Micron Technology Inc. (MU) and Advanced Micro Devices Inc. (AMD), has gained a mere 65% in that time. SMH gained another 3.9% last week and SOXX tacked on another 5.9%. MU and AMD are among the top chip stocks recently. Over the past five sessions, MU has gained nearly 40% and AMD is up more than 25%. In one session last Tuesday, MU was up 20% and climbed to a $1 trillion market cap for the first time.

Surprisingly, as strong as they were, even the semiconductor stocks were just semi-important last week. The S&P 500 has nine stocks categorized as “Technology Hardware: Storage & Peripherals.” The poorest performer in that nonet last week was Apple, Inc., at +2.32%. Five of the other eight had gains of more than 23% over the last five days. Leading the pack was Dell Technologies, Inc. (DELL), which has gained more than 66% in the last five sessions. DELL gained a little more than 100% in May and is now up 234% YTD. Those companies are among the latest that investors have discovered will benefit greatly from the demand for processors, memory and hardware needed for the data centers of the future.

A big part of the reason for the massive gains in those groups is that the future revenues and profit margins of those companies had been apparently vastly underestimated. Analysts seemed to be surprised by the huge increase in demand for hardware and memory driven by the expanding demands of artificial intelligence. Another part of the rush to buy those stocks was their upward momentum. The last few years have seen several long periods in which momentum has been the factor that has been the most reliable indicator of a stock’s future direction. That certainly seems to have been the case over the past two months.

Last week also brought a spike in volatility for another small group of stocks. A handful of public companies that are in the business of launching rockets and developing global broadband networks have drawn an increase in attention recently as the SpaceX IPO approaches. Rocket Lab Corp. (RKLB) gained about 88% in the three weeks into last Thursday. Intuitive Machines, Inc. (LUNR), a “space exploration, infrastructure and services” company, rocketed about 90% higher over that same stretch. And AST SpaceMobile, Inc. (ASTS), which “engages in building a broadband cellular network in space,” shot up a little more than 100% in three weeks. Unfortunately, they all gave back a big slice of those gains on Friday following news that the Blue Origin New Glenn rocket “experienced a major anomaly” during a planned hot-fire test Thursday evening. The explosion reminded everyone that there are still a few bugs to work out before we have data centers in space.

The first-quarter earnings season is now behind us and the first reports for the second quarter are still several weeks away. This week’s economic calendar is the longest it’s been in several weeks. The employment data on Thursday and Friday will likely be the most significant reports.

Links to previously published commentaries can be found at benjaminfedwards.com/Library/Market Commentary

Twitter: Where impressive daily gains through April and May in the technology sector were a fairly common occurrence, for the semiconductor subsector, they were almost automatic. Check out this week’s recap, Semiautomatic.

LinkedIn: Where impressive daily gains through April and May in the technology sector were a fairly common occurrence, for the semiconductor subsector, they were almost automatic. Check out this week’s recap, Semiautomatic.

LinkedIn for Advisors: Where impressive daily gains through April and May in the technology sector were a fairly common occurrence, for the semiconductor subsector, they were almost automatic. Check out this week’s recap, Semiautomatic.