Why the S&P 500 and Nasdaq Just Had Their Best Month Since 2023
May was the best month for the S&P 500 and Nasdaq Composite since November 2023, with the indexes rising 6.2% and 9.6%, respectively.
Investors entered the month cautiously optimistic. Employment data at the beginning of the month suggested the economy remained on solid footing. Meanwhile, White House officials were signaling a desire to ease tensions with China, whose imports at the time were subject to a minimum 145% tariff.
Stocks surged mid-month when the U.S. and China agreed to slash their respective tariff rates for 90 days while officials negotiate a broader deal. Stocks got additional boosts from President Trump's dealmaking tour of the Middle East and progress in Congress on Trump's tax-cutting 'One Big, Beautiful Bill.'
The AI trade came back into vogue in May, thanks to solid big tech earnings reports and the flurry of AI-focused deals coming out of Trump's Middle East trip. AI favorites Constellation Energy Group (CEG) and Super Micro Computer (SMCI) were the S&P 500's second and third-best performing stocks, rising 37% and 26%, respectively.
Nvidia (NVDA) stock gained 24% in May. Much of those gains came on the U.S.-China trade reprieve, but a strong quarterly earnings report near the end of the month helped.
Tesla (TSLA) stock advanced nearly 23% as CEO Elon Musk distanced himself from the Trump administration and reassured Wall Street he's committed to leading the electric vehicle maker through a tumultuous time. Tesla is expected to take a major step toward refashioning itself as an AI company when it launches its robotaxi service in Austin, Texas, in June.
May was a difficult month for the health sector. Shares of UnitedHealth Group (UNH) lost about a quarter of their value as the healthcare conglomerate withdrew its full-year guidance, announced the departure of its CEO, and reportedly came under Justice Department investigation for Medicare fraud. UnitedHealth was the worst-performing stock in the S&P 500. It also weighed on the Dow Jones Industrial Average, which rose a relatively modest 3.9% over the month, which wasn't even its best monthly performance of 2025.
Eli Lilly (LLY) was the second-worst performer, falling about 18% during the month. Lilly is in a race with Denmark's Novo Nordisk (NVO) to dominate the GLP-1 market, but the weight-loss drugs' high prices have drawn scrutiny.
A May 12 executive order targeting drug prices, while less severe than expected, was an additional headwind for pharmaceutical stocks this month.
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