Global stocks surge 5% in May as market breadth broadens beyond tech

Global equities added nearly 5% in May, extending 2026 gains past 10% as the rally broadened beyond megacap technology shares.

Global stocks rose 4.8% in May, pushing year-to-date gains past 10%, as first-quarter earnings growth of 22% fueled a broadening rally beyond technology shares.

"The market is being supported by improving fundamentals rather than extended valuations," said Terry Sandven, chief equity strategist at U.S. Bank Asset Management Group. "We're seeing strength both at home and abroad, and among large and small companies."

The S&P 500 climbed 5.2% in May to close at a record 7,600, while the Nasdaq Composite added 8.4% and the Dow Jones Industrial Average rose 2.8%. The information-technology sector surged 15.9%, though eight of 11 S&P 500 sectors lost ground for the month. Breadth improved in the final week, with 57.2% of S&P 500 stocks trading above their 200-day moving average, up from below 50% earlier in May, according to Dow Jones Market Data.

The broadening suggests the rally has room to extend. The equal-weighted S&P 500 has outperformed its market-cap-weighted counterpart for two consecutive weeks, while the small-cap Russell 2000 has gained 17.6% year to date — ahead of the S&P 500's 10.7% advance. Investors now turn to May employment data due Friday for confirmation the economy can sustain the earnings momentum.

The two-month surge — the S&P 500's 16.1% gain in April and May combined — was the largest for any such period since May 2020, according to Dow Jones Market Data. The rally has been led by technology, with semiconductor stocks drawing the bulk of investor inflows as artificial intelligence spending drives capital expenditure across megacap companies.

Yet the concentration risk that worried strategists in April has begun to ease. Keith Buchanan, senior portfolio manager at Globalt Investments, said a narrow market reliant on a handful of companies poses risks, including the potential for AI-driven productivity gains to come at the expense of broader employment and consumer spending. The recent broadening, he said, is a healthier sign.

Breadth Improves as More Stocks Join the Rally

The 10-day advance/decline line for the S&P 500 turned positive in late May after a negative stretch earlier in the month, according to Bespoke Investment Group. On May 29, 40 S&P 500 stocks traded within 2% of their 52-week highs, up from 30 two weeks prior.

Industrial demand has stabilized, with conditions for railroad and trucking companies improving, Sandven said. Consumer spending has remained resilient, supporting restaurants, retailers and travel companies, though the gains have been bifurcated between higher- and lower-income cohorts.

Cross-asset conditions have reinforced the equity rally. The U.S. 10-year Treasury yield held at 4.47%, while crude oil rose 2.5% to $89.58 a barrel and gold slipped 0.9% to $4,553 an ounce. The Cboe Volatility Index, or VIX, fell 2.7% to 15.32, signaling complacency relative to the trailing one-year average.

"Looking toward year-end, the path of least resistance for equities is still up," Sandven said. "Inflation is relatively stable, interest rates are trending flat and earnings are strong. That's Goldilocks for stocks."

This article is for informational purposes only and does not constitute investment advice.