Stock Market Today: September 30th - October 4th, 2019

well today is the final trading day of the month (sept) and also for q3.

the worst month of the year for the market has been september since 1950, but the spx is looking at 3 consecutive up september's (absent any crazy selloff going into this final hour today. )

pulling this chart from stock trader's almanac-

historically speaking when sept. finishes the month green, oct. tends not to fare too bad either. i guess last year was the one notable outlier in recent years where we had a positive sept. but a really negative oct.



here is the spx avg. monthly returns by month. oct. is known for some major market crashes, but not too shabby over the past 10 years in particular.

 

Q3 Performance Recap
Mon, Sep 30, 2019

Markets officially closed the books on the third quarter today and based on where things stood at the end of August, equities finished the quarter in considerably better shape than most people would have expected. Think about it. At the end of August, we had just seen a month of major volatility heading into what has historically been the worst month of the year for equities, but thirty days later, the S&P 500 finished the month in positive territory enough so to scratch out a positive return for the quarter. Year to date, the primary benchmark for US large-cap stocks is up 20% YTD through the first nine months of the year for the first time since 1997. Besides the S&P 500, every major index ETF we track in our Asset Class Performance matrix had a gain in September. For the quarter, only three ETFs (mid and small-cap focused) were down, while two other ETFs (Nasdaq 100 and the Russell 1000) have logged YTD gains of 20%+.

Value was the big winner in September as those ETFs were all up around 5% this month. YTD, though, there's a bit of a disparity; while large and mid-cap growth ETFs are outperforming their value peers, small-cap growth is actually underperforming small-cap value by a wide margin.

In terms of sector returns, Health Care was the only one to finish September in the red, and it is now the worst-performing sector YTD. In addition to Health Care, the only other sector that is up less than 10% on a YTD basis is Energy. Heading into the quarter it was up over 10%, but a 6% decline in Q3 erased more than half of the YTD gains. On the upside, the biggest gainers were Utilities and Financials. Technology slightly underperformed the broader market in September, but it still outperformed the S&P 500 for the quarter padding to its gaudy YTD performance numbers. The fact that Technology (+31%) and Utilities (+25%) are the two leading sectors YTD shows just how unique the year 2019 has been.

Moving outside of the US, Hong Kong was the only country ETF that was down in September, and it was far and away the worst-performing sector in Q3 with a decline of over 12%. While US equities were broadly positive in Q3, international markets were much more mixed on a dollar adjusted basis with eleven of the fourteen country ETFs listed down on the quarter. Year to date, though, international returns have also been up across the board, although again, most have underperformed the S&P 500.

In the commodities space, even after dropping more than 7% in September, Silver was up over 11% in Q3. Gold saw similar directional moves, although not nearly to the same degree. In Energy, the wide disparity in performance between Oil and Natural Gas remains in place as their directional returns are in the opposite direction YTD, QTD, and MTD.

Outside of an extraordinary August, treasuries gave back some of those gains in September with the biggest declines at the long end of the curve. Year to date, though, long-term treasuries are still looking at YTD returns of just under 20%, or a percentage point less than the S&P 500.

 

Typical October Trading: Greatly Improved Recently

October’s long-term track record is littered with sizable declines however, over the last 21-years the month has improved significantly. In this more recent time period October is the second-best month for DJIA and S&P 500 and the best month for NASDAQ. Yes, the month suffered a double-digit loss in 2008, but it also advanced double-digits in 2011. In the chart above, October’s strength over the last 21-years is clear. Aside from a brief bout of weakness on trading days five through seven, the market’s direction is higher. One exception appears to be the Russell 2000, small-cap index which spends the majority of the month in the red.

 

haha yeah, i think what's surprising (at least for me for today anyway) is that "bad news" actually got treated as bad news

rewind a few years back, especially during the QE years, this maybe would have been a flat or dare i say a green day

still 90 minutes to the close here, but it isn't looking too likely, unless we got some really good news on the trade front

 

The Most Volatile Time of the Year
Tue, Oct 1, 2019

Welcome to October. The most volatile month of the year. While most investors and traders are well aware of the increased tendency for volatility in the month of October, the chart below provides an excellent illustration of that trend. In it, we show the average percentage spread between each month's closing high and closing low going back to 1928. For all months since 1928, the S&P 500 has averaged an intra-month spread of 6.41%, but for the month of October, the average has been nearly two full percentage points wider at 8.25%! The next closest month in terms of intra-month volatility has been November with an average range of just 6.96%. While October is a big outlier in the data, volatility in the market is pretty seasonal. From July right through November, average intra-month volatility is above the historical average for all months, but from December through June, the average intra-month range has been below average.

 

U.S. Manufacturing Drops to 10-Year Low

U.S. manufacturing activity fell to a 10-year low, dragged down by a weakening global economy.

The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) fell to 47.6 in September, the lowest level since June 2009. As shown in the LPL Chart of the Day, the gauge stayed in contractionary territory (below 50) for a second straight month.



Underlying data in the ISM report showed tepid global demand continued to weigh on domestic manufacturing. ISM’s gauge of new orders was largely unchanged, but new export orders dropped to the lowest level of the economic cycle.

“Trade tensions have curbed global demand and stalled global manufacturing,” said LPL Financial Chief Investment Strategist John Lynch. “Even though manufacturing plays a relatively small role in the U.S. economy, it has historically been a bellwether for economic growth and corporate profits, so the recent decline could signal slowing growth ahead.”

The October 1 ISM report could also signal impending weakness in the labor market. ISM’s employment index fell to 46.3 in September, the lowest level since January 2016. Declining employment in the manufacturing sector could be a bad omen for the September jobs report, which is scheduled to be released October 4. Jobs growth has remained steady this year, but manufacturing payrolls growth has declined noticeably.

Overall, we’re watching to see if the weakness in manufacturing spreads to other areas of the U.S. economy. So far, the services sector remains in expansion, even though it has slowed in recent months, and consumer spending has adequately propped up economic growth. However, the cracks in the economic foundation are spreading, and we don’t expect any meaningful improvement in global manufacturing until we see a U.S.-China trade deal.