Illustration by Elias Stein
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The stock market’s worst month—September—will soon be upon us. The
S&P 500
index has averaged a 1% loss in September dating back to 1928, says Dow Jones Market Data. The
Dow Jones Industrial Average
has notched a similar September loss going back to 1896. It’s clearly the bad month for both indexes. Last year, stocks fell 4.8% in September. And who can forget Lehman Brothers? And, well, Sept. 11?
Much debate has gone into explaining the September Effect. More tangible are troubling signs for this September. Indexes are up by double digits in percentage terms since their 2022 lows in mid-June, lifted by cooling inflation and a cautious Federal Reserve. But the probability of a three-quarter point interest-rate hike in September has risen, with a half-point raise less likely.
Then there are oil prices, which sagged, putting extra money in consumer pockets. The price of West Texas Intermediate oil has hung in the low $90s per barrel, but edged up this past week on Saudi suggestions of an output cut. Oil’s multiyear high, hit earlier this year at over $100, is more than 10% above the current level. Oil prices have been hurt by China’s economic slowdown. But China just cut a key rate, which could send prices rising again. Likewise, protracted war in Ukraine could push up energy prices again as winter nears.
Evercore
equity strategist Julian Emanuel believes that the market’s recent ability to rise despite rising rates will fade. The good news: September selling may have already begun. The Dow and S&P 500 have been down since Aug. 20, with the latter off about 4%. Let’s get it over with.
Next Week
Monday 8/29
The Federal Reserve Bank of Dallas releases its Texas Manufacturing Outlook Survey for August. Consensus estimate is for a negative 12.3 reading, about 10 points better than in July. Four of the five regional federal reserve bank surveys of business conditions have had at least one negative print in the past two months, portending a significant slowdown in the manufacturing sector. Earlier this month, the New York Fed’s Empire State Manufacturing Survey posted its second-largest-ever decline.
Tuesday 8/30
Baidu,
Best Buy
,
Chewy,
Hewlett Packard Enterprise
,
and
HP
Inc.
report quarterly results.
The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Economists forecast 10.3 million job openings on the last business day in July, almost 400,000 fewer than in June. Job openings remain elevated historically but are off their peak of 11.9 million from earlier this March.
S&P CoreLogic releases its Case-Shiller National Home Price Index for June. Home prices are expected to jump 19.5% year over year, after increasing 19.7% in May. New- and existing-home sales have plummeted this year, but home prices remain near record highs.
The Conference Board releases its Consumer Confidence Index for August. The consensus call is for a 96.5 reading, about one point more than July’s 95.7 figure. The index has declined for three consecutive months.
Wednesday 8/31
ADP releases its National Employment Report. Economists forecast that the economy added 250,000 nonfarm jobs in August. ADP has changed its methodology, complicating comparisons with recent months.
Cooper
Cos., MongoDB, Okta, and
Veeva Systems
release quarterly earnings.
The Institute for Supply Management releases its Chicago Business Barometer for August. Economists forecast a 51 reading, roughly one point less than in July. July’s 52.1 reading was the lowest for the index since August 2020.
Thursday 9/1
Broadcom
,
Hormel Foods
,
and Lululemon Athletica hold conference calls to discuss quarterly results.
The Census Bureau reports construction spending data for July. Total spending is seen rising 0.2% month over month to a seasonally adjusted annual rate of $1.77 trillion. Construction spending declined 1.1% in June, the first drop since last September.
Friday 9/2
The BLS releases the jobs report for August. Expectations are for nonfarm payroll employment to increase by 270,000, after a gain of 528,000 in July, which was more than double forecasts. The unemployment rate is seen remaining unchanged at a near-record-low 3.5%.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com