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A late-May rally in stocks isn't cause for investor celebration just yet

If you managed to sleep through May or simply avoided your brokerage app, congratulations.

You might be sitting on some gains despite the major averages punishing investors with gut-wrenching drops of up to 10% at the month's lows.

When the dust settled, the S&P 500 (^GSPC) finished fractionally higher while the Dow (^DJI) inched up just 13 points. The Nasdaq Composite (^IXIC) lost just over 2.1% in May.

A six-day rally to close the month of May stemmed the hemorrhaging, but reality still smarts. The Nasdaq Composite just posted its fourth monthly loss of the year — something it hasn't done since 2002.

That index — along with the S&P 500 consumer discretionary (^SP500-25) and communication services sectors (^SP500-50) — are all still down more than 20% in 2022.

Energy stocks were again the standout in May, minting another 16% for the Energy Select Sector SPDR Fund (XLE). XLE is now up an eye-watering 57% this year thanks to the efforts of Warren Buffett-owned Chevron (CVX) and Occidental Petroleum (OXY) — among many others.

On the retail front, consumer staples stocks are getting hammered just like their discretionary cousins, with these sectors down 4.1% and 5.1%, respectively, this month.

Those Walmart (WMT) and Target (TGT) earnings that led to their biggest drubbing since the 1987 crash? Those losses stung, with Walmart settled down 16% for the month of May, and Target off 29%. And some smaller names in the sector fared worse, with Abercrombie & Fitch (ANF) shedding 41% and Bed Bath & Beyond (BBBY) plummeting 37%.

One bright spot in May was the semiconductor industry.

These stocks largely avoided the pounding that most of the market took, and used the latest rally to claw back early-month losses and then some.

Most of the chip names (yellow, below) closed in the green for May, though they're all sitting on losses — some substantial — for the year.

Nvidia (NVDA) is the worst off in the basket — down 37% year-to-date. Advanced Micro Devices (AMD) gained 19% in May but is still down 29% in 2022. Fabricators and analog integrated circuit-makers are the least worst-off this year — Texas Instruments (TXN), Analog Devices (ADI), and GlobalFoundries (GFS) are all down less than 10% in 2022.

Contrast this performance with some of the disasters in the software space where cloud and cybersecurity companies continue to get pummeled.

Okta (OKTA), Zscaler (ZS), and Snowflake (SNOW) each shed a quarter of their value in May alone and are each down 50% or worse this year. Gaming companies are faring better than most, with Activision Blizzard (ATVI) up 3.0% in May and 17% on the year. Electronic Arts (EA) mirrors those returns — up 17% on the month and down 5.0% on the year.

But let's not forget — many of these software-related names have fared as poorly as many names did after the 1990s tech bubble popped.

With these names getting cheap, some have been scooped up by investors in M&A deals, including Broadcom's (AVGO) move to buy VMWare (VMW) in what would be one of the biggest tech deals ever.

A flat month, and a robust rally to cap it off, however, doesn't exactly change the character of this market.

Mother Market is an expert at keeping fear in greed in check. Greedy bulls and bears alike can both get punished in a trendless, directionless market. "If they don't scare you out, they wear you out," says Brian Shannon at

So far in 2022, the longest rally of the year lasted just about about two weeks back in March. If the current bounce does materialize into something more, it's worth remembering that many Wall Street traders and analysts were calling for a capitulation or washout to new lows. That didn't happen yet, and it doesn't even have to.

As June begins we're officially entering the summer doldrums, during which many traders head to the beach, leaving an already-illiquid markets a bit more illiquid.

Instead of "sell in May and go away," perhaps the new market mantra should be, "hedge in May and go away."

Jared Blikre is a reporter focused on the markets on Yahoo Finance Live. Follow him @SPYJared.

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