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The final week of September got off to a shaky start as stock futures wobbled early Monday morning, hinting at more potential losses ahead as big month-to-date declines have investors on edge. After rolling over several afternoon rallies in recent sessions, traders will be looking for signs that the heavy selling pressure may finally be easing. However, lingering macroeconomic concerns over interest rates and political gridlock in Washington continue to weigh on sentiment.
Futures contracts tied to the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 were all hovering near the unchanged mark in premarket trading. The tentative moves higher came after all three major indexes ended last week deep in negative territory, extending their drops for September. Data from Dow Jones Market shows the S&P 500 has given back 4.2% this month alone, while the tech-heavy Nasdaq has slumped 5.9%. Even the blue-chip Dow is off over 2% as volatile trading persists.
Bond yields, which move inversely to prices, refuse to stabilize and have alarmed investors by surging over 30 basis points on the benchmark 10-year Treasury note since the start of September. The spike, driven by the Federal Reserve’s hawkish rate hiking path, has pressured risk assets by dampening appetite for stocks. “Once again, the move in rates has proven to be too much too fast for equity markets to handle,” said Adam Turnquist, chief technical strategist at financial services firm LPL Financial.
Congress remains deadlocked on passing a budget, raising the specter of a possible government shutdown. Lawmakers abruptly ended negotiating sessions last week without a deal in sight to fund federal agencies past the September 30th deadline. Democrats and Republicans remain divided on proposed spending cuts. The stalemate adds to economic uncertainty at a critical time.
Some analysts see a few bright spots on the horizon that may provide support. Earnings estimates, while still projecting declines, are slowly improving according to figures compiled by FactSet. Third quarter profit forecasts are now seen falling by just 0.2%, an improvement from previous estimates of a 0.4% contraction. Forward guidance also points to a rebound in the fourth quarter and through 2023. If companies can continue beating lowered targets, it may offer the market a reprieve.
Monday’s session will be an important barometer to gauge appetite for equities ahead of a seasonally weak October. A decisive move lower to kick off the week could see investors capitulate further just as volatility has picked up. On the other hand, buyers showing resilience to defend recent floors would provide hope the heavy selling may finally be drying up. All eyes will be on whether dip buyers emerge to curb downside or if bears retain full control in a make-or-break moment for this beleaguered month.
Our other articles provide additional insight into ongoing geopolitical tensions, economic indicators, and corporate earnings that all factor into setting the direction of stock prices. By staying informed of key developments through fact-based reporting, readers can make more informed investment decisions.
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