September has been unexpectedly positive for stocks, making it difficult to predict another strong month in the market. Historically known as the weakest month for stocks, September has instead seen major indices such as the Dow Jones Industrial Average and S&P 500 achieve record heights, buoyed by the Federal Reserve’s significant rate cut last week. The Dow closed above 42,000 for the first time, with the S&P 500 surpassing the 5,700 mark.
However, as October approaches—a month recognized for its market volatility, with the S&P 500 experiencing an average daily move of 1.3% since 1950—investors remain cautious. October’s reputation as a challenging month for equities, exacerbated during U.S. presidential election years, adds to the anxiety. Rising geopolitical tensions in the Middle East and Europe, along with potential weaknesses in the domestic labor market, further contribute to an uncertain outlook for U.S. stocks.
Jonathan Krinsky, BTIG’s chief market technician, expressed doubts about the S&P 500 maintaining its momentum through these typically weak months in the election cycle. Despite this, as of Friday, stocks were poised for a victorious month and quarter, with the Dow and S&P 500 each set for a 1.5% gain in September, and the Nasdaq Composite up by 2.7%. Quarterly figures showed the Dow outperforming with a rise of over 7%, the S&P 500 increasing by more than 5%, and the Nasdaq Composite up by over 1%.
A crucial event that could influence stock prices in October is the September jobs report, due in one week. Market participants are closely monitoring labor market data, following recent inflation figures suggesting the Federal Reserve’s efforts to control pricing pressures might be succeeding. Adam Turnquist, LPL Financial’s chief technical strategist, emphasized the importance of labor market data for the stock market’s short-term trajectory. Market expectations for September indicate an addition of 150,000 jobs, up from 142,000 in August, with an unemployment rate remaining at 4.2%.
Turnquist noted that a weak jobs report could undermine investor confidence in a "soft landing" scenario, where growth slows, inflation eases, but the economy avoids recession. Conversely, a stronger or as-expected report would likely have a muted impact on equities.
Even with recent record highs and bullish sentiment, some investors are waiting for more favorable conditions to invest heavily in the market. Concerns include the decreasing number of stocks reaching new highs and the recent underperformance of semiconductors, which had previously outpaced the broader market. Turnquist anticipates a better buying opportunity in October, potentially if the S&P 500 retests its September lows of 5,400 or drops to its 200-day moving average around 5,200—implying declines of about 6% to 9% from Thursday’s close, with the S&P 500 then hovering above 5,700.
Jeff Hirsch, editor of the Stock Trader’s Almanac, also predicts a 5% to 10% drop for the S&P 500 in the coming weeks but remains optimistic for the year’s end. He envisages the possibility of the broader index achieving new all-time highs, potentially reaching 6,000 once market uncertainties are resolved.
The upcoming week includes key events and data releases that could impact the market, as follows:
Monday, Sept. 30, 2024
- 9:45 a.m.: Chicago PMI (September)
- 10:30 a.m.: Dallas Fed Index (September)
- 1:55 p.m.: Federal Reserve Chair Jerome Powell speaks at the National Association for Business Economics’ annual meeting in Nashville
- Earnings: Carnival
Tuesday, Oct. 1, 2024
- 9:45 a.m.: S&P PMI Manufacturing Final (September)
- 10:00 a.m.: Construction Spending (August)
- 10:00 a.m.: ISM Manufacturing (September)
- 10:00 a.m.: JOLTS Job Openings (August)
- Earnings: Lamb Weston, Nike, McCormick & Co.
Wednesday, Oct. 2, 2024
- 8:15 a.m.: ADP Employment Survey (September)
- Earnings: Conagra Brands
Thursday, Oct. 3, 2024
- 8:30 a.m.: Continuing Jobless Claims (09/21)
- 8:30 a.m.: Initial Claims (09/28)
- 9:45 a.m.: PMI Composite Final (September)
- 9:45 a.m.: S&P PMI Services SA Final (September)
- 10:00 a.m.: Durable Orders (August)
- 10:00 a.m.: Factory Orders (August)
- 10:00 a.m.: ISM Services PMI (September)
- Earnings: Constellation Brands
Friday, Oct. 4, 2024
- 8:30 a.m.: Hourly Earnings Preliminary (September)
- 8:30 a.m.: Average Workweek Preliminary (September)
- 8:30 a.m.: Manufacturing Payrolls (September)
- 8:30 a.m.: Nonfarm Payrolls (September)
- 8:30 a.m.: Participation Rate (September)
- 8:30 a.m.: Private Nonfarm Payrolls (September)
- 8:30 a.m.: Unemployment Rate (September)
Reporting contributed by CNBC’s Nick Wells.
