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Stocks Point to Higher Open; Should You Sell in May?

David Becker
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Stocks Point to Higher Open; Should You Sell in May?

There is an old adage when it comes to trading stocks, which is that you sell in May and go away. Historically stocks have underperformed during the May through September period, but this scenario does not take into account an economic backdrop where the economy is expanding and in this situation the sell in May not likely a good idea.

Seasonally, the S&P 500 index has been flat during the May – July period over the past 20 years, down 50% of the time. In fact, historical back tests show there is no significant reduction in performance during this period.

Stock futures were somewhat buoyed despite a Chinese Purchasing Managers Index that slightly missed expected. China’s official manufacturing PMI edged up to 50.4 in April from 50.3 in March but slightly missed consensus of 50.5.

AT&T (NYSE:T) has reportedly approached DirecTV (NASDAQ:DTV) about buying the satellite-TV provider in a deal that could be worth at least $40 billion. DirecTV, whose market cap is $39.5 billion, is open to a deal. The combined company would have almost 26M pay-TV subscribers.

There are a number of data points ahead during the US trading session. Personal income is expected to grow 0.5% in March, while consumption should rise 0.6%. An shift in the number could be in the cards, given the potential impact of stronger hours worked data in the employment report. U.S. light vehicle sales in April are expected to stay flat at 16.3 million units as we appear to have recovered from the recent downswing due to cold weather. The April ISM is expected to tick down to 53.5 from 53.7 in March. This comes on the heels of Wednesday’s strong upward movement in the Chicago PMI which climbed nearly 7 points to print at 63, compared to the 57 expected by economists.

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