The month of May marked the transition from a national April lockdown to a gradual reopening of the domestic and global economy. Markets have continued to rally with the reopening due to optimism around an economic recovery later this year as well as promising news of rapid progress of COVID-19 vaccine.

The week began quietly with the US, UK, and many markets in Asia closed Monday. When trading resumed, global equities climbed as investors were encouraged by more signs of economies reopening. WTI crude oil rallied nearly 90% in May, its best month ever. It was a bounce back from April losses. Energy stocks, however, aren’t keeping up with those gains. The XLE energy ETF climbed just 2% in May in what calls a “disconnect” between supply and demand.

The more cyclical sectors, like financials and industrials, outperformed last week, while European equities reacted positively to a proposed €750 billion recovery fund by the European Commission.

By sectors, the most outperformed weekly stocks were led by Distribution Services at 6.21%, followed by Finance at 5.75%, and Process Industries (5.68%). Meanwhile, the weakest sectors were from theEnergy Minerals sector (0.08%), Retail Trade (1.26%),Non-Energy Minerals (1.71%) and Consumer Services sector (2.27%).

S&P 500 Returns to 3K.

Investors got a bit of a psychological boost on Wednesday, when the S&P 500 closed above the 3,000 level for the first time since early March.

Incremental Gain.

The S&P 500 and the Dow climbed modestly in a holiday-shortened week, roughly matching the previous week’s gains of more than 3%. Most of the week’s overall rise came on Tuesday and Wednesday.

May Flowers.

The latest month’s stock market gains paled in comparison with April’s sizzling double-digit returns, but the major indexes continued to regain ground lost when stocks fell sharply in February and March. The NASDAQ added nearly 7% in May, while the S&P 500 and the Dow both rose more than 4%.

EU to the Rescue.

The executive arm of the European Union on Wednesday proposed a 7-year spending plan totalling more than $2 trillion to deal with the economic impact of the coronavirus. More than one-third of the package is aid for countries such as Italy and Spain, which have been hit especially hard by the pandemic.

Spending Drop-Off.

Spending by U.S. consumers in April tumbled nearly 14%, the biggest monthly decline since the government began tracking spending data in 1959. However, personal income jumped nearly 11% last month, boosted by government stimulus payments.

Labour Losses.

Friday’s monthly jobs report is expected to be the most closely watched economic release of the week. Uncertainty over the impact of coronavirus-related restrictions has challenged the ability of economists to make forecasts for the May report. The April report tallied 20.5 million job losses—the largest monthly decline on record—while the unemployment rate surged to 14.7%.

Other Important Macro Data and Events

The tone in markets is in uncertainty with signs of increased tensions in the US-China trade relationship. US President Donald Trump mused upon economic sanctions against China for the way it dealt with the early stages of the COVID-19 outbreak, including blocking a government retirement fund from investing in Chinese equities.

Continuing unemployment claims dropped for the first time since February, and the number of people applying for the first time fell for the eighth week in a row.

All major European stock markets posted strong advances as a European Union stimulus package moved closer to approval.

What We Can Expect from the Market this Week

States continue to reopen their economies after the coronavirus pandemic forced the country to shutter nonessential businesses. The reopening is now taking place amid widespread protests across the U.S. over police brutality.

The durability of the market rally is likely dependent on the path to recovery from the COVID-19-triggered economic downturn. U.S. GDP is forecast to decline 40% annualized in the second quarter, the largest quarterly decline since the Great Depression.

Important economic data being released include the ISM manufacturing Purchasing Managers' Index (PMI) on Monday, the services PMI on Wednesday, and the May jobs report on Friday.