While September has historically been the worst month for stocks, the major indexes bucked the trend this year, with the Dow Jones Industrials and the S&P 500 pushing through to new highs on Monday, while the NASDAQ also posted a gain for the month. Notably, the S&P 500 advanced more than 20% through the first three quarters, marking only the first time the index managed such a feat since 1997.
Enthusiasm appears to continue to stem from the Federal Reserve’s recent pivot on interest rates. Chair Jerome Powell said on Monday that, if the economy stays on course, he expects two additional quarter-point reductions this year, which would reduce the central bank’s target rate to 4.25%-4.50%. However, the strike by the International Longshoremen’s Association that began at midnight could potentially change the equation a bit, as the stoppage significantly disrupts the shipment of goods into and out of the U.S.
Turning to this week’s economic calendar, this morning the Census Bureau will be reporting on construction spending for August. The Street is looking for a month-over-month increase of 0.2%, compared to a decline of 0.3% in July. Additionally, the Institute for Supply Management is scheduled to release its Purchasing Manager’s Index (PMI) for last month. Consensus estimates are suggesting a slight pickup to a reading of 47.6%. Although this would be higher than the August reading of 47.2%, it would mark the sixth-consecutive month of contraction for the index. (Percentages above 50 represent expansion, while those below 50 indicate deceleration.)
Also on tap for today, the Bureau of Labor Statistics is due to release its Job Openings and Labor Turnover Survey (JOLTS) for August this morning. Analysts are calling for a decrease to 7.640 million positions, compared to 7.673 million for July.
Thursday brings the ISM’s PMI for the non-manufacturing (services) sector. The outlook there is more positive, with expectations pointing to a relatively flat reading of 51.6%, up a notch from 51.5% in August.
More key to the Fed’s thinking will be Friday’s U.S. Jobs report for September. With July and August having fallen short of expectations, a pickup on this front could suggest that the 50-basis-point cut in September was a step in the right direction, paving the way for additional reductions in the lending rate. Forecasts suggest payrolls will expand by 144,000, up from 142,000, while the unemployment rate keeps steady at 4.2%.
As we approached this morning’s opening bell, stock futures were indicating a negative start to the day. In overnight trading, stocks in Asia mostly closed up, highlighted by an 8% surge for the Shanghai Stock Exchange. Meanwhile, the European markets are showing modest gains.
Summing up Monday’s moves for the major indexes, the Dow Jones Industrials gained 17 points, or a fraction of a percent, the S&P 500 advanced 24 points (0.4%), and the NASDAQ composite was up 69 points (0.4%). – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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