The Index Climbs, the Crowd Thins

Trend: up, and leaning on fewer shoulders. The S&P 500 rose 5.1% in May to 7,580, closing at a record 11 times, and is up 10.7% for the year. It ended the month 11.0% above its 200-day averageGlossary: The average closing price over a set number of recent days, recalculated every day. It smooths out day-to-day noise to show the underlying trend., up from 7.2% at the end of April. The Nasdaq 100Glossary: An index of the 100 largest non-financial companies listed on the Nasdaq exchange. It leans hard toward technology, so it moves further than the S&P 500 in both directions. gained 10.5%, emerging markets (EEMGlossary: The iShares MSCI Emerging Markets ETF, which holds large and mid-sized companies in developing economies such as Taiwan, China, India, South Korea and Brazil.) 7.2% and the Russell 2000Glossary: An index of about 2,000 smaller US companies. Smaller firms borrow at floating rates more often, so this index reacts quickly when interest rates move. 4.3%. The real split sat inside the S&P 500: the PHLX Semiconductor index, a basket of chip stocks, jumped 22.1%, while the equal-weight S&P 500Glossary: A fund holding the same 500 companies as the S&P 500, but giving each one the same weight, so the largest handful cannot set the result on their own. (RSP), which gives every member the same weight, returned 2.6% against 5.3% for the cap-weightedGlossary: An index that weights each company by its total market value, so the biggest companies move it the most. The S&P 500 is cap-weighted; its equal-weight version gives every company the same share. SPY. The first tab below shows how far those paths have spread since the end of March; the second, the share of members still in an uptrendGlossary: An uptrend is a price that keeps making higher highs and higher lows over months; a downtrend is the reverse. A common test is whether the price is above or below its long-term moving average..

VolatilityGlossary: How far and how fast a price swings over a period, whether up or down.: calm at the index, restless in the stocks. The VIXGlossary: An index built from S&P 500 option prices that estimates how far the index is expected to swing over the next 30 days. Higher means traders are paying up for protection., the market's headline fear gauge, ended May at 15.3, its low for the month, down from 16.9; its peak, 18.4 on May 15, stayed below the 20 level that separates calm from watchful. Single stocks told a different story. Cboe's constituent volatility index (VIXEQGlossary: The Cboe S&P 500 Constituent Volatility Index: the average expected 30-day swing of the individual stocks in the S&P 500, read from their options prices.), which averages the expected swings of the individual members, rose from 40.7 to 44.7 and closed at its May high on the same day the VIX closed at its May low. At 2.9 times the VIX, the gap was the widest at any month-end in Cboe's VIXEQ data, which run back to 2014, and above the previous daily peak of 2.90 in July 2024; the long-run average is about 1.8. Part of that is probably appetite, not fear: Citadel Securities reported that traders chasing chip and NasdaqGlossary: An index of every common stock listed on the Nasdaq exchange, around 3,000 of them, weighted by how much each is worth. It leans hard toward technology, so it runs further than the S&P 500 in both directions. stocks with call options pushed implied volatility up even on days the market rose.