May Market Outlook A Muddle

“Following two weeks of impressive gains that have led many investors to hope the slumping economy and stock market have turned around, Wall Street gets a gut check this week.”

That’s what I wrote Monday, and barring a major rally on Friday — which won’t happen unless the gross domestic product figure due to be released before trading begins shows a big upside surprise — it looks like tech and Internet investors, at least, are back to feeling slightly nauseous.

Through Thursday’s close, here are the numbers for the past four days of trading:

            4/26 Close  4/20 Close   % Change  

Dow Jones     10692       10580        +1.1%      
Nasdaq         2034        2163        -6.0%
S&P500         1234        1243        -0.7%
ISDEX           239         262        -8.8%

The good news is that the major stock exchanges and indexes appear poised to show gains for all of April, which would mark the first month of across-the-board advances since January. Here’s where they stand with two days of trading to go:

            4/26 Close  3/30 Close   % Change    

Dow Jones     10692        9879        +8.2%
Nasdaq         2034        1840       +10.5%
S&P500         1234        1159        +6.5%
ISDEX           239         206       +16.0%

As you can see, the Dow is comfortably above the 10000 mark, but the Nasdaq is just one bad day away from falling below 2000 again.

With many earnings reports due in coming days, I expect stocks to basically tread water through the first half of May. Which way they go after that depends on what the Federal Reserve does when it meets in the middle of the month. Another rate cut could kick-start a run-up. But after this month’s surprise half-point interest rate reduction, a May move by the Fed seems unlikely, especially since it would be the fifth cut this year.

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