The S&P 500 edged higher, +0.3%, Monday as the market closed out the month and the quarter on a winning note. The DJIA closed basically unchanged despite being down 400 points at following Fed Chair Jerome Powell’s comments. The Nasdaq rose 0.3%. The markets had a tough start to September but recovered with the help of a jumbo, half-point interest rate cut by the Fed. The Dow and S&P 500 closed out the month up 2% each, while the Nasdaq was 2.7% higher than August. Though investors are widely upbeat heading into the final quarter of the year, historically, October can be troubling for the markets. It’s known as a time of extreme volatility, with some of history’s biggest slumps occurring during the month. Later this week, investors will be watching important labor market data for insights into the health of the economy.
S&P 500
sources: Bloomberg, CNBC
Closing snapshot
source: MarketWatch
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“If you are brave enough to say goodbye, life will reward you with a new hello.” – Paulo Coelho
Q3 sector recap
With all the talk of rotation the last few months, it’s worth a look to see how the sectors performed as AI mania loosened its grip on investors. Everything from utilities to financials beat tech while smaller stocks walloped mega-caps.
sources: FactSet, Bloomberg, WSJ
China equities
The Chinese stock market rallied Monday to their best day in 16 years, with related U.S. ETFs also soaring after recent economic stimulus buoyed investor optimism in the market. The Shanghai Composite Index was up over 8%, in its best day since September 2008, capping a nine-day win streak. It ended September up 17.39%, its first monthly gain in five and its best monthly performance going back to April 2015.
The Shenzhen Composite Index closed up 10.9%, its best day since spring of 1996. It gained 24.8% in September, its best month going back to April 2007. While the China ADR index was higher by almost 1.5%, after rising over 6% at one point in the session
sources: Bloomberg, WSJ, CNBC
East coast ports rush to get cargo in before strike
A potential strike at ports up and down the East Coast and along the Gulf Coast is set to begin after midnight Monday. Logistics experts are saying the few hours are before the deadline are critical in moving as much trade as possible before a shutdown that will do serious damage to the functioning of the U.S. economy.
The International Longshoremen’s Association (ILA) said in a statement on Monday that its wage demands were still not being met and blamed ports management for a strike that will start at 12:01 a.m. ET on Tuesday, Oct. 1. “Time isn’t on the side of importers,” a logistics CEO tells CNBC.
Federal Reserve Bank of Chicago President Austan Goolsbee said he’d be concerned if a dockworkers strike — which is expected to start Tuesday — drags on as it may impact supply chains.
“Anything that’s a negative supply shock, in our language, that’s going to raise the cost of doing business and lead to shortages, is something that we’re just going to have to deal with and the impacts are never good,” Goolsbee said Monday in an interview on Fox Business.
source: Bloomberg, CNBC
Disappointed
Yesterday afternoon, Fed Chairman Jerome Powell spoke at the National Association for Business Economics Annual meeting. Fed watchers were anxious to glean any information they could about the Fed’s intentions in terms of the size and duration of future rate cuts. But Powell left analysts hanging by stating that the Fed’s recent half-point move should be interpreted as a sign that future moves will be as aggressive. ”We are not on any preset course.” he told the NABE, though he did express confidence in economic strength and sees inflation as continuing to cool.
“This is not a committee that feels like it’s in a hurry to cut rates quickly,” he said during a Q&A period following his speech. “If the economy performs as expected, that would mean to more rate cuts this year, a total of 50 [basis points] more.” The market didn’t love what J.P. had to say and the Dow initially dropped 200 points on the prospects of the Fed not being as aggressive as had hoped, though the market rebounded later in the session.
source: Bloomberg, CNBC, IBD
Let’s make a deal
DirecTV and Dish have agreed to combine in a deal that will create the biggest pay-TV provider in the U.S. with approximately 18 million subscribers. DirecTV will buy its rival from EchoStar while earlier Monday, AT&T agreed to sell its remaining 70% stake in DirecTV to private equity firm TPG for about $7.6 billion. AT&T will exit the entertainment business with the deal, in line with its strategy of paring debt on focusing on its wireless and broadband businesses.
The deal requires bondholders to write off some $1.6 billion in Dish-related debt. A variety of U.S. regulatory agencies must sign off on the deal. The Federal Communications Commission blocked a merger between the two satellite TV providers in 2002.
sources: WSJ, Bloomberg, CNBC, IBD
Movers
Nvidia (NVDA) dropped early on Monday as reports surfaced that Chinese officials urged local companies to steer clear of Nvidia chips. The country is hoping to boost its own semiconductor sector to counter U.S. sanctions.
Carnival (CCL) stock fell after the release of its earnings report. Though the company beat analyst expectations, its fourth-quarter outlook was seen as disappointing.
Coinbase Global, MicroStrategy: Shares of crypto stocks declined pre-market, as bitcoin prices fell below $65,000.
CVS Health: Glenview Capital Management met with executives from CVS on Monday to propose ways it can improve its operations, a potential start of an activist stance by the hedge fund. CVS shares ticked up premarket.
On Sept. 20th, Microsoft announced an agreement with Constellation Energy to restart a nuclear reactor at Three Mile Island that had been mothballed since 2019. MSFT gets clean power for its ongoing expansion of datacenters, while Constellation gets a guaranteed buyer of electricity alongside various tax credits to sweeten the deal. Shares of Constellation are up over 20% since the news.
sources: IBD, WSJ, Barrons
Chart of the day
Stellantis(STLA)
Automaker Stellantis got pummelled Monday after issuing a profit warning due to increases competition from Chinese automakers. The Jeep makers was down 13% on the open. Previous support around $14.83 has become resistance. From a technical perspective, it will be interesting to see if buyers appear on the dip, as the more time and volume it spens below $15.00, the worse it looks on the charts.
sources: ThinkOrSwim, IBD
In other news:
After years of tight supply and high prices, automobiles are finally becoming more affordable. The current average price for a new vehicle is down 1.7% from a year ago and down 4% from 2022. The best selling type of vehicles is subcompact SUVs, which make up 22% of the market. The story on EVs, is “steady demand” according to Cox Automotive. Electric vehicles represent about 9% of the total market.
Billionaire (who isn’t these days?) Peter Thiel sold $600 million of data mining firm Palantir last week, one day after the company joined the S&P 500, with its share price up over 150% versus a year ago.
Ireland’s privacy regulator fine Meta Platforms $101.7 million for storing some users’ passwords without cryptographic protection or encryption.
Citadel Securities is pursuing a brokerage license in China after its failed bid for a Credit Suisse unit, people familiar said.
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