How stocks will perform MLK week

Since 1998, markets have been closed for Martin Luther King Jr. Day, which is this coming Monday. Can we predict the direction of the market for the coming week? In this article, I examine whether there is an upward or downward trend for the S&P 500 during the shorter trading week. I also break the week down by trading day, ultimately looking for stocks that will outperform or underperform the following week, for whatever reason.

The chart below compares the S&P 500’s performance on Martin Luther King Jr. Day to the performance of other weeks. Historically, the holiday week was a bad week for stocks, with the index losing an average of 0.57%, with only 41% of the weeks positive. Other weeks, the S&P has averaged a 0.17% gain and 57% of positive weeks. While the holiday week is positive, the mean positive return is well below the normal mean positive return and tends to be limited to the upside.

This next table breaks down MLK by week. The week tends to get off to a bad start on Tuesday, with an average loss of 0.26% and less than half of the positive returns. In fact, the S&P 500 has fallen the day after Martin Luther King Jr. Day in seven of the last eight years. During the holiday week, Wednesday was the best day for shopping and Friday was the worst.

This first chart below shows the stocks that bought and outperformed the overall stock market trend during MLK week. The table is sorted by positive percentage and then average return. No stocks have been positive in the past two years. But two stocks have beaten the S&P 500 every year for the past 10 years — Workday ( WDAY ) and Intuit ( INTU ). Technology and software stocks are the most common among S&P 500 stocks during MLK week.

This next chart shows the best performing stocks on Martin Luther King Jr.’s day. Again, it shows the stocks with least positive returns and then they are sorted by average return. Financial stocks and coal, oil and gas stocks are overrepresented in this list.

I would like to add JPMorgan Chase (JPM) and Eastman Chemical (EMN) to the list of worst performers. 30% positive over the last 10 years during MLK week, so they didn’t make the list. It should be 20% or worse to make the table above. However, these two stocks are the only ones to beat the S&P 500 over the past 10 years.