By Martin Baccardax
U.S. stocks were set Friday to close out one of the strongest months on record, with more gains on tap for the final day of trading, as the "sell in May" adage took another hit amid a tech sector takeover that has been redefining domestic markets.
The S&P 500 was on pace to power more than 5% higher this month, marking one of the best performances in May since the 1950s, on the back of surging chip and tech stocks that have carried markets through the worst of the U.S. war with Iran.
The advance trails last year's 6.2% gain, which also was tech-led and followed the early April selloff tied to President Donald Trump's enactment of tariffs -- and also lags behind big gains during the 1990s dot-com era and the bull market peak of the mid-1980s.
The tech-focused Nasdaq Composite, meanwhile, was on pace to rise more than 8.2% this month, trailing last year's 9.6% surge but still likely falling into the top five in terms of May performances by the end of the session.
The information technology sector, in fact, has risen more than 18% this month, nearly four times the gains booked in health care, and has risen nearly 30% since the start of the year.
"The enthusiasm for stocks is warranted given the unprecedented spending spree on AI infrastructure combined with stable employment and relatively resilient consumer spending," said Emily Bowersock Hill, CEO and founding partner at Bowersock Capital Partner s in Lawrence, Kansas.
"The AI story is helping to offset the negatives from the Iran war, the consequent oil price spike, and continued uncertainty over a resolution to the conflict," she added.
"Stock markets care about company profits, as long as earnings grow, stock prices can continue to rise," said Bowersock Hill.
There's been no shortage of those profits: collective first-quarter S&P 500 profits grew 29% from last year, according to LSEG, marking one of the strongest sets of gains in at least three years. Many on Wall Street, including Goldman Sachs, see more advances ahead.
"Since bottoming on March 30, the S&P 500 has gained roughly 18% over just 39 trading sessions, producing an average daily gain of more than 0.8% while experiencing a maximum drawdown of only 1.2% during the advance," said LPL Financial's chief equity strategist, Jeffrey Buchbinder.
"While easing geopolitical tensions and an ongoing cease-fire framework have provided a major catalyst for the rally, strong corporate earnings have also played a critical role in sustaining momentum," he added.
Chip stocks also were impressive in terms of earnings gains, and led the pack in terms of monthly advances. Micron Technology was on pace for a stunning 78% May gain, which lifted it into the $1 trillion dollar club earlier this week, while Advanced Micro Devices powered 46% higher thanks in part to a stronger-than-expected outlook and its move toward challenging market leader Nvidia.
The PHLX semiconductor index, meanwhile, has gained more than 22% since the end of last month, taking its second-quarter advance to just under 70%.
An index of the so-called Magnificent Seven tech giants, meanwhile, powered nearly 7% higher this month, with Tesla surging more than 16%, perhaps in anticipation of next month's SpaceX IPO, and Apple riding bets on a new AI investment strategy to gain more than 15% and top $4.6 trillion in market value.
The tech sector's exceptional strength, however, has given markets pause for concern, especially in the face of elevated inflation pressures and ongoing risks tied to the U.S. war in Iran.
The massive run-up also has raised the specter of a summertime pullback, given thinner trading volumes and a lack of corporate headlines expected over June and July.
SpaceX's $2 trillion listing will also test the level of conviction for tech investors as the market absorbs some $86.5 billion in new stock, the largest on record, from Elon Musk's newest vehicle later next month.
"Semiconductor and memory-related stocks have experienced parabolic advances since the March lows, with several momentum indicators reaching historically elevated levels," said LPL Financial's Buchbinder. "While overbought conditions alone are not necessarily bearish, the probability of near-term profit taking or rotational activity appears to be rising as investor positioning becomes increasingly crowded."
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 29, 2026 07:23 ET (11:23 GMT)
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