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Wake me up when September ends

Welcome to September, when stocks go usually down

We’re entering a pretty ugly month for financial assets.

9/3/24 11:32AM

Welcome to September. Although given the track record of recent years, perhaps we should say beware, instead: the S&P 500 and the STOXX 600 have lost ground in each of the last 4 Septembers.

S&P Average Performance — Bespoke Investment Group

And if you’re hoping for respite in fixed income, there hasn’t been any there, either. In fact, Bloomberg’s global bond aggregate is down in each of the last 7 Septembers. So any gains this month would certainly be bucking the trend.

Global Bond Aggregate down in each of the past 7 Septembers, while gold has been lower in 10 of the last 11 Septembers. (Source: Deutsche Bank Research)

Since 1945, the S&P 500 averaged a decline of 0.78% in September. But this negative performance has been exacerbated over the past decade, where the S&P 500’s median performance in September was -2.6%, per Bespoke Investment Group. Only 3 out of 12 months have averaged declines, and September is by far the worst of the three. For the past four Septembers, S&P 500 was down 4.9%, 9.3%, 4.8%, and 3.9%.

While bulls pushed August into positive territory with a 1.3% gain, “seasonal weakness in September could spoil the momentum,” wrote Adam Turnquist, chief technical strategist for LPL Financial.

One key event this month is the Federal Reserve meeting on September 18, where US monetary policymakers are expected to join many other developed-market central banks in cutting rates. This coincides with the midway point of September, which, historically, is a time when losses begin to crescendo.

September seasonal setup for S&P 500 — (Source: LPL Financial Research; Bloomberg 08/29/24)

The month is starting just the way you’d expect, given history: S&P 500 is off as much as 1.6% on Tuesday morning. The last time S&P 500 was positive on the first trading day after Labor Day was 2016.

While everyone is watching seasonality, beneath the hood of the stock market is the big battle: whether tech stocks can carry the rest of the market, or if the world falls off Atlas’ shoulders.

Michael Purves, the founder of Tallbacken Capital Advisors, said that “it’s the elections, not the Fed meeting, which gets our focus.” He noted that if the stocks of the big tech companies couldn’t lead the market, then the overall market could be subject to further volatility due to the election.

Jim Reid, global head of macro research at Deutsche Bank added that the end of September will mark a five-week countdown to the US election, and close races usually lead to lower stock markets before a rally.

The final week of August showed how Magnificent Seven stocks dragged the S&P 500 lower, even the majority of S&P 500 stocks went up. Nvidia’s earnings report, which disappointed relative to high expectations, will “contribute to the whipsaws on the index level and delay re-entry to all-time high territory,” according to John Kolovos, the head of technical strategy at Macro Risk Advisors.

Tasha Matsumoto

Stocks close lower, trimming steeper losses as oil retreats

Oil prices fell after Israeli Prime Minister Benjamin Netanyahu said his country is helping with US efforts to open the Strait of Hormuz.

Nate Becker8h

Stocks get a jolt as Netanyahu says Israel is helping US efforts to open Strait of Hormuz

Israeli Prime Minister Benjamin Netanyahu said in a press conference that his country is helping with US efforts to open the Strait of Hormuz, putting a jolt into stocks.

The S&P 500, which had been solidly negative for most of the day, turned slightly green after the remarks. The rebound lost a bit of steam shortly thereafter, but stocks still remained higher than they were before Netanyahu’s comments.

“Israel is helping, in its own way, in intel and other means, the American efforts to open the Strait of [Hormuz],” Netanyahu said, according to a video of the press conference.

Here are another few interesting headlines coming across from the presser, per Reuters:

*NETANYAHU: IRAN HAS NO CAPACITY TO ENRICH URANIUM OR MAKE BALLISTIC MISSILES AFTER 20 DAYS OF WAR

*NETANYAHU: CAN’T DO A REVOLUTION FROM THE AIR, THERE NEEDS TO BE A GROUND COMPONENT AS WELL

*NETANYAHU: ISRAEL ACTED ALONE AGAINST SOUTH PARS

*NETANYAHU: TRUMP ASKED US TO HOLD OFF ON FUTURE SUCH ATTACKS

And here’s how the market reacted instantly after his comments:

Stocks Slump as Energy Surge Fuels Inflation Fears: Markets Wrap

“Israel is helping, in its own way, in intel and other means, the American efforts to open the Strait of [Hormuz],” Netanyahu said, according to a video of the press conference.

Here are another few interesting headlines coming across from the presser, per Reuters:

*NETANYAHU: IRAN HAS NO CAPACITY TO ENRICH URANIUM OR MAKE BALLISTIC MISSILES AFTER 20 DAYS OF WAR

*NETANYAHU: CAN’T DO A REVOLUTION FROM THE AIR, THERE NEEDS TO BE A GROUND COMPONENT AS WELL

*NETANYAHU: ISRAEL ACTED ALONE AGAINST SOUTH PARS

*NETANYAHU: TRUMP ASKED US TO HOLD OFF ON FUTURE SUCH ATTACKS

And here’s how the market reacted instantly after his comments:

Matt Phillips10h

Gold tumbles as market sees Fed shifting toward inflation fighting

Gold and gold miners tumbled Thursday, as the rolling Iran war energy crisis revived worries about inflation and pushed the market to take additional rate cuts this year off the table.

Gold (SPDR Gold Shares ETF) futures dropped roughly 6% shortly after 12 p.m. ET, hammering share prices for miners Newmont and Freeport-McMoRan. Silver (iShares Silver Trust) futures were down nearly 9%.

The decline in precious metals came alongside another sharp rise in energy prices. US benchmark crude oil (United States Oil Fund LP) and natural gas prices both jumped more than 3% after major Iranian attacks on Qatari energy infrastructure. US retail gasoline prices tracked by the American Automobile Association hit $3.884, up 33% from the end of last month, when a joint US-Israeli attack on Iran ignited hostilities.

Normally, gold prices are seen as a hedge on inflation, which might suggest that they should rise alongside expectations for persistent price increases.

But the speed of the Iran war energy shock — which will add to inflationary pressures already visible in recent economic reports, such as this week’s Producer Price Index, and could become a political problem for the Trump administration — has nudged traders to change their their views on whether the Federal Reserve would be able to deliver the rate cuts widely expected just a few weeks ago.

Yields on shorter-maturity US Treasury notes shot higher Thursday, reflecting expectations for tighter monetary policy. And prices in the market for federal funds futures suggest traders no longer see the US central bank cutting interest rates this year at all. (Early this month, market pricing implied expectations for two more cuts this year.)

On Thursday, yields fell on longer-term US government securities, such as the US 30-year bond. That suggests the market thinks a Fed shift toward inflation fighting and away from rate cutting would likely result in some decline in growth and/or inflation, helping to explain the drop in precious metals prices, as there would be less of a need for inflation hedges in such a scenario.

Bond Traders No Longer Price In Any Chance of Fed Cut in 2026

Normally, gold prices are seen as a hedge on inflation, which might suggest that they should rise alongside expectations for persistent price increases.

J. Edward Moreno11h

Novo says FDA has approved high-dose Wegovy shot

The Food and Drug Administration approved Novo Nordisk’s high-dose Wegovy shot, the company announced on Thursday.

Wegovy HD, a once-weekly 7.2-milligram injection, helped patients lose 20.7% of their body weight after 72 weeks, putting it in line with Eli Lilly’s competitor drug, Zepbound. By comparison, Wegovy typically has a maximum dose of 2.4 milligrams, which resulted in 15% weight reduction over 68 weeks in trials.

Wegovy HD was the first drug to be approved through the FDA’s new priority voucher system. This comes as Novo, despite being early to the GLP-1 boom, has been outpaced in sales by Lilly. The company released a pill version of Wegovy in January, which has shown strong early uptake, though new competitor products are set to debut this year and next.

The stock is down about 1.6% for the day, but was down nearly 3% before the announcement.

Tasha Matsumoto

Crudely speaking

11h

What we talk about when we talk about crude oil

While both WTI and Brent are light and sweet crude, differences in geography and chemical composition influence the Brent-WTI spread.