I hope you rested up over the long weekend, because September will be a busy and volatile month. Here are the issues that will shape the action in the month ahead. Syria: Global investors fear that U.S. military action in Syria might spur a wider regional conflict, which could disrupt the flow of oil in the Middle East. There were already concerns that the Egyptian conflict would affect 4.5 million barrels a day of petroleum products that flow through the Suez and SUMED Pipeline. But if tensions were to spread to the Straight of Hormuz, where 17 million barrels a day flow, oil and gas prices would jump and global economic growth would be hindered.
Jobs Report: The last major economic release before the Federal Reserve’s September policy meeting will be this week’s non-farm payroll employment report. In August, the four-week average of initial jobless claims fell to a six-year low of 330,000. While job cuts are tapering off, what is less clear is whether employers are ready to start hiring on a broad based and consistent enough level to bring down the unemployment rate and to help some of the 11.5 million unemployed Americans to land jobs. The consensus for August is for a monthly increase of 180,000, which would be a small increase from July’s 162,000. The unemployment rate is expected to remain at 7.4 percent.
Federal Reserve Policy Change: After last week’s upward revision to second-quarter GDP growth to a 2.5 percent annualized rate from the originally reported 1.7 percent, more analysts believe that the Federal Reserve will begin to taper its monthly bond purchases at the upcoming September 17-18 FOMC policy meeting. Doubters note that the uncertainty surrounding Syria, the recent rise in oil prices, weakness in consumer spending, and a slow down in the housing recovery might prompt the Fed to wait until the December meeting. Investors have been preparing for the taper since late May, but the scale of the reduction remains the big mystery.
Debt Ceiling, Part Deux: It was just over two years ago when Congress fought about increasing the nation’s borrowing limit. After that battle, Standard & Poor’s downgraded the U.S.’ credit rating and the S&P 500 stock index subsequently dropped by more than 17 percent. Last week, Treasury Secretary Jack Lew sent a letter to Speaker John Boehner indicating that the government would effectively reach its $16.7 trillion debt ceiling in mid-October. Both sides have drawn their respective lines in the sand, which means that the fiscal battle in Washington could get ugly and spread to Wall Street in a hurry.
September is the cruelest month for stocks: While stock markets tend to crash in October, September has actually been the worst month for stock performance, according to the Stock Trader's Almanac, with the S&P 500 losing an average of 0.52 percent since 1971.
MARKETS: US stock indexes closed down on the month, with the Dow and S&P 500 seeing their worst months since May 2012.
- DJIA: 14810, down 1.3% on week, down 4.4% on month, up 13% on year
- S&P 500: 1633, down 1.8% on week, down 3.1% on month, up 14.5% on year
- NASDAQ: 36589, down 1.9% on week, down 1% on month, up 18.9% on year
- 10-Year Treasury yield: 2.75% (from 2.82% a week ago) 4th consecutive month of price declines/yield increases
- Oct Crude Oil: $107.65, up 1.1% on week
- Dec Gold: $1396.10, up 0.08% on week
- AAA Nat'l average price for gallon of regular Gas: $3.59
THE WEEK AHEAD:
Mon 9/2: US MARKETS CLOSED FOR LABOR DAY
10:00 ISM Mfg Index
10:00 Construction Spending
Motor Vehicle Sales
8:30 International Trade
2:00 Fed Beige Book
7:30 Challenger Job-Cut Report
8:15 ADP Employment Report
8:30 Weekly Jobless Claims
8:30 Productivity and Costs
10:00 Factory Orders
10:00 ISM Non-Mfg Index
8:30 August Employment Report