September concluded with the S & P 500 and Dow Jones Industrial Average experiencing declines, marking the third pullback in four months for the S & P 500 and ending the Dow's five-month upward trend. In contrast, the Nasdaq Composite managed to rise for the second consecutive month.
The volatility in equities was driven by fluctuating monetary policy expectations amid persistent inflation and rising Treasury yields, which have reached levels not seen since 2002.
Looking ahead to October, a month often associated with significant market declines, historical data indicates that the S & P 500 has averaged a 0.7% gain in October since 1976, with even better performance in midterm election years, averaging a 2.4% increase.
However, the market faces hurdles, including high Treasury yields and uncertainty surrounding the Federal Reserve's upcoming meeting on October 27-28, where traders currently assign a 37% chance of a rate hike, down from nearly 70% a week prior. Additionally, market breadth appears weak, with 389 stocks in the S & P 500 declining in September.
Scott Rubner from Citadel Securities noted ongoing stress beneath the surface, although he acknowledged improved positioning and lower valuations. Meanwhile, JPMorgan's trading desk expressed a bullish outlook for October, anticipating a more favorable market setup as bond yields stabilize and oil prices trend lower