The main U.S. equity indexes opened lower and showed red through most of the last trading session of September. Late-day buying lifted all three into the green for the day, as all three also closed the month and the third quarter with gains.
Some stocks and sectors moved more than others, though investors, traders and speculators remain broadly focused on Washington D.C., hours ahead of a potential federal government shutdown at 12:01 am Eastern Standard Time.
“Despite a weaker end to the month,” observes LPL Financial portfolio strategist George Smith, “the equity market ‘melt-up’ successfully navigated what has historically been a tricky month for equities.”
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“As we move toward October,” Smith explains, “this month has been far from spooky, leaning more ‘treat’ than ‘trick’ for equity investors.” In fact, as the strategist details, October has seen positive returns nearly 60% of the time since 1950, with average gains of 0.89%.
And October is, on average, followed by even stronger average gains in November and December. The fourth quarter “is the strongest three-month period of the year with a combined average return of almost 2% since 1950 and over 6% over the past five years.”
At Tuesday’s closing bell, the broad-based S&P 500 added 0.4% to 6,688. The S&P 500 closed September with a gain of 3.5% vs an average return of -0.61%, and it was up 7.8% for the third quarter.
The tech-heavy Nasdaq Composite rose 0.3% to 22,660 and was up 5.6% for September and 11.2% for the third quarter.
The Dow Jones Industrial Average climbed 0.2% to 46,397 Tuesday, and the blue-chip index posted positive monthly (+1.9%) and quarterly returns (+5.2%) too.
Energy squeeze
Energy stocks were the worst of the 11 official S&P 500 sectors for a second day running after Exxon Mobil (XOM, -1.3%) announced a restructuring of its global operations that will include approximately 2,000 job cuts. At the same time, the per-barrel price of West Texas Intermediate crude oil declined by 1.5% after sliding more than 3% Monday.
As Reuters reports, the OPEC+ consortium “is likely to consider a larger oil production increase of 411,000 barrels per day (bpd) for November,” which would be “three times the 137,000 bpd increase that the Organization of the Petroleum Exporting Countries plus Russia and other allies had agreed for October.”
According to StoneX analyst Alex Hodes, “This (OPEC+) strategy could significantly squeeze margins for high-cost U.S. shale producers, potentially forcing them to scale back the record-level output they’ve maintained.”
CoreWeave (CRWV, +11.7%) soared after Bloomberg reported it signed a new contract with Meta Platforms (META, -1.2%) that could be worth as much as $14.2 billion. CRWV, which completed its IPO in March, will provide its AI cloud-computing infrastructure to support the social media platform.
The deal runs through 2031, though Meta holds an option to extend it an additional year. “The agreement underscores that behind every AI breakthrough are the partnerships that make it possible,” CoreWeave said.
Last week, CoreWeave announced an expanded deal to provide data-center capacity to OpenAI at a new total value of $22.4 billion. And that’s on top of a $6.3 billion contract with Nvidia (NVDA, +2.6%).
New leadership tunes
Spotify Technology (SPOT, -4.2%) announced that founder Daniel Elk is handing over his CEO responsibilities to co-presidents Alex Norström and Gustav Söderström, who will become co-CEOs on January 1.
Short-term questions about the strongest voices inside the C-suite aside, SPOT is among the best stocks to buy now because it’s a high-quality company with good fundamentals, including solid earnings, strong revenue growth and positive free cash flow.
SPOT stock did catch a downgrade from Goldman Sachs analyst Eric Sheridan, who now rates the digital DJ Neutral, or Hold, as opposed to Buy. Sheridan also bumped up his 12-month target price from $765 to $770, upside of 10.3% from Spotify’s closing price on Tuesday.
WOLF survives, advances
Wolfspeed (WOLF, +30.2%) may not appear on many lists of the best semiconductor stocks after it filed for bankruptcy protection in June. WOLF did, however, see a big bounce following management’s announcement of the chipmaker’s successful completion of its financial restructuring process and emergence from Chapter 11 protection.
CEO Robert Feurle said Wolfseed’s “much improved financial stability” as well as a vertically integrated fabrication facility for 200-millimeter circular silicon carbide wafers as foundations for a “new era.”
The CEO says Wolfspeed is “well positioned to capture rising demand in end markets, such as AI, EVs, industrial and energy, that are rapidly growing and recognizing silicon carbide’s potential.”
Where to look for incoming economic data
The Bureau of Labor Statistics’ Job Openings and Labor Turnover Summary (JOLTS) showed little change across openings, hires and separations in August.
“The latest JOLTS report furthered the notion that the labor market is merely running in place,” write Wells Fargo economists Sarah House and Nicole Cervi. “A low rate of layoffs remains one of the few bright spots in the jobs market, but the low quit rate elevates the risk of layoffs jumping higher.”
It could be the last we hear from the agency for a while: According to a contingency plan released by the Labor Department on Friday, the BLS will shut down unless and until the federal government is funded again.
“The suspension of economic statistical releases will make it harder to track the state of the economy during the shutdown,” writes Comerica Bank Chief Economist Bill Adams. “That may cause financial markets to react more than usual to private data releases.”
Adams highlights the ADP National Employment Report, the next notable data item on this week’s economic calendar, as well as the Institute for Supply Management’s Services Purchasing Managers Index (PMI). The economist expects the ADP report to show “a lean 40,000 jobs added” in September, down from 54,000 in August, and the ISM Services PMI “to edge down to 51.3 from 52.0.”
Meanwhile, the Conference Board said its Consumer Confidence Index declined by 3.6 points to 94.2 in September, missing a consensus estimate of 96.0.
“In our view,” assesses Barclays economist Pooja Sriram, “the decline in sentiment reflects consumers’ broad-based concerns about employment and income.”
Sriram cites “data through August” that “have reshaped our understanding of the underlying labor force dynamics” as well as results from the University of Michigan Surveys of Consumers.
“Both surveys reflect developments that have shown moderation and slowing within the labor market,” she adds. “We generally take stronger signals from the Michigan index and remain attentive to the release of its preliminary October print slated for next Friday, October 10.”