September is September and it drives investors and Wall Street crazy.
Everyone comes back from summer vacation happy, maybe even relaxed. And then the stock market basically tells them: “Don't get complacent.”
September arrived last week and the unrest is increasing.
The Standard & Poor's 500 Index fell 4.3% for the week, its worst weekly loss since a 4.7% drop in September 2022. The Nasdaq Composite Index fell 5.77%, its worst weekly loss since Jan. 17, 2022.
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The concern is twofold:
- The US economy appears to be slowing down.
- Traders, investors and fund managers around the world are waiting for the Federal Reserve to make a decision on interest rates, which will not be known for another week.
So, September is the month to play, well, September. Between 2014 and 2023, stocks have fallen in September seven times. The month has been the worst month for stocks overall since 1950, according to the Stockbrokers Almanac.
But the declines in the S&P 500 and the Dow since stocks peaked this summer have been modest: 4.6% since the S&P's intraday peak of 5,669.67 on July 16 and just 3% since the Dow peaked at 41,585.21 on Aug. 30.
The Nasdaq and Nasdaq-100 indices, dominated by tech and Big tech, are a different story:
- The Nasdaq is down 10.6% since hitting a 52-week high of 18,671.07 in July. A 10% drop from a peak is the popular definition of a correction.
- The Nasdaq-100 has fallen by almost 11% since its July peak.
The declines should not come as a surprise. Both indices were seriously overbought in early July and were increasingly vulnerable to short sellers. Nvidia (NVDA) has fallen 27.3% since hitting a high of $140.76 on June 20.
Oracle says the calendar ahead is showing few results (ORCL) The most important report, due on Monday, is probably the most important. The week also offers two important reports that can cause volatility: the consumer price index, due on Wednesday, and the producer price index, due on Thursday.
Everyone in the markets is waiting for the Federal Reserve meeting on September 17 and 18. The central bank is expected to cut its key rate from 5.25% to 5.5% to 5% to 2.5%, with further cuts to follow.
Apple to introduce new and improved iPhones
But there is one event that could excite traders: Apple. (APL-American Lead Association) big product announcement event, known as “It's Glowtime” on Monday.
The event, which begins at 1 p.m. ET, will focus on the iPhone, its biggest source of revenue.
The event is expected to feature at least a few new iPhone models, updates to the Apple Watch and perhaps some information about Apple Intelligence, the company's effort to incorporate artificial intelligence into its products.
Apple shares up 14.7% in 2024, third among the Magnificent 7 stocks after Nvidia, up 107.7%, and facebook parent Meta Platforms (GOAL) 41.3% more.
But Apple was also, in relative terms, the best-performing Mag 7 stock on Friday, down just 0.7% on the day. It was the second-best Mag 7 stock of the week, down 3.6%, behind Tesla. (TSLA) down 1.6%.
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Why did the market have such a bad week?
Several reports on manufacturing orders, employment and construction, all released on Tuesday, the first trading day after Labor Day, were weaker than expected and suggested business was slowing but, crucially, NOT contracting.
Friday's jobs report showed fewer jobs were created in August than expected and job creation estimates for June and July were lowered. Once again, more evidence of a slowdown in the economy.
The reports fueled fears on Wall Street that the Federal Reserve and its chairman, Jerome Powell,'s insistence on making data-driven decisions was delaying rate cuts and damaging the economy.
This is what could happen next week
The calendar will offer some opportunities. If markets appreciate Apple's iPhone extravagance and Oracle's results, that could offer a boost.
Database giant Oracle is expected to earn $1.32 a share, up from $1.19 a year ago. Revenue is forecast at $13.2 billion, up from $12.45 billion previously.
Shares are up 34.5% this year, versus 13.4% for the S&P 500 and 11.2% for the Nasdaq. The stock is just 3.3% below its 52-week high, compared with 27% for Nvidia. And Oracle hasn’t broken above its 50-day moving average since late 2022, a sign of investor confidence.
Finally, its relative strength index is below 70, indicating that it is not overbought. Relative strength is a measure of momentum. The higher the index, the more the market is moving too high and too fast.
Two other reports to keep in mind: Gamestop (GME) the video game retailer, and Adobe (ADBE) .
Gamestop shares are up 36% this year, though the consensus estimate for this quarter is for a loss of 8 cents a share, down from a loss of 3 cents a year ago. Revenue is estimated at $895 million, down 23% from a year ago.
The earnings estimate for Adobe, a key player in digital imaging, cloud computing and other endeavors, is $4.62 a share, up from $3.98 a year ago. Revenue of $5.4 billion would be up about 10% from a year earlier. The stock is down 5.5% this year.
The bottom may not be far away
Assuming the economy isn't falling off a cliff, averages could be starting to approach a bottom.
The lowest point to look for in the S&P 500 is the 200-day moving average, or around 5,100. The Nasdaq's relative strength index closed Friday at 37. Below 30 means it's oversold. At its peak in July, the S&P's RSI hit 80 and has been falling ever since.
That leaves two unforeseen factors: the CPI and the PPI. They should be benign. Job growth is slowing. Interest rates are lower. Oil prices are on the decline. Gasoline prices nationwide will fall below $3 a gallon this fall. The national average on Saturday was $3.281, but 11 states, all in the South, are already seeing prices below $3.
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