It will be hard to count on another strong month for stocks after September’s performance. The final month of the third quarter, often seen as the weakest month of the year for stocks, was surprisingly good for investors. The major market averages were on track from Friday to close strongly higher, helped by the Federal Reserve’s big rate cut last week. Both the Dow Jones Industrial Average and the S&P 500 hit new highs this month. The 30-stock Dow closed above 42,000 for the first time, while the broader index did the same, climbing above 5,700. But investors are gravitating toward October, the most volatile month for stocks, with the S&P 500 posting an average daily move of 1.3% up or down, according to a CNBC Pro analysis of historical market data dating back to 1950. As a result, traders have to weather a historically bad month for stocks – typically worse during a US presidential election year – and the opposite sentiment that has many worried about a pullback of the market or even a correction. Throw into the mix rising geopolitical risks from conflict in the Middle East and war in Europe, as well as the possibility of further cracks in the domestic labor market, and the outlook for US stocks next month appears dim at best. “Can the SPX Overturn Two Typically Weak Months on the Election Cycle Calendar?” BTIG chief market technician Jonathan Krinsky asked this week, referring to the S&P 500. “Unlikely.” .SPX YTD mountain S & P 500 Regardless, stocks were on track for a winning month and a winning quarter. As of Friday’s close, the Dow and the S&P 500 were up 1.8% and 1.6% in September, respectively, while the Nasdaq Composite was up 2.3%. On a quarterly basis, the blue-chip Dow was the top performer, rising 8.2%. The S&P 500 was up 5.1%, while the tech-heavy Nasdaq Composite was up 2.2%. September Jobs Report Chief among the catalysts likely to move prices in October is the September jobs report due in one week. Investors are laser-focused on the strength of the labor market, especially after the latest major inflation measure released on Friday again showed that the Fed’s fight against price pressures may be winnable. “As simple as it sounds, I think it’s really going to be driven by labor market data,” said Adam Turnquist, chief technical strategist at LPL Financial, about the stock market’s near-term direction. The U.S. economy is expected to have added 144,000 jobs this month, up from 142,000 jobs in August, according to a Dow Jones estimate. Meanwhile, the unemployment rate is forecast to remain steady at 4.2%. Turnquist worries that a weak jobs report that casts doubt on investors’ expectations of a soft landing — where growth slows and inflation eases but the economy avoids recession — could weigh on stock prices. On the other hand, the impact of a stronger report on stocks is likely to be more muted, he said. Seasonal Weakness Even with stocks breaking out to new records in late September and bulls firmly in control, skeptics are waiting for a better point to start putting more money into the market. They worry that the market is currently showing signs of exhaustion, given fewer stocks making new highs, or the fact that semiconductors, which have outperformed the broader market this year, have ceded their leadership. LPL Financial’s Turnquist expects a better buying opportunity in October, possibly if the S&P 500 retraces September’s lows of 5,400, and especially if it falls to its 200-day moving average, which was last around 5,200. For the S&P 500, those levels represent declines of about 6% to 9% from Friday’s close. The broader index itself last hovered above 5,700. Similarly, Jeff Hirsch, publisher of the Stock Trader’s Almanac, said he expects the S & P 500 could fall 5% to 10% in the coming weeks, but that it is bullish at the end of the year. Hirsch said he would not be surprised if the broader index hit new all-time highs, with 6,000 a “reasonable” level after some of the uncertainty has been removed from investors’ minds. “I’m looking to get long very soon,” he said. Week Ahead Calendar All times ET. Monday, September 30 9:45 am Chicago PMI (September) 10:30 am Dallas Fed index (September) 1:55 p.m. Federal Reserve Chairman Jerome Powell speaks on the economic outlook at the annual meeting of the National Association for Business Economics in Nashville Earnings: Carnival Tuesday, Oct. 1 9:45 am. S & P PMI Manufacturing final (September) 10am Construction Expenses (August) 10am ISM Manufacturing (September) 10 a.m. JOLTS Job Openings (August) Earnings: Lamb Weston , McCormick & Co. Wednesday, October 2 8:15 am ADP Employment Survey (September) Earnings: Conagra Brands Thursday, October 3 8:30 AM Continuing Jobless Claims (09/21) 8:30 AM Initial Claims (09/28) ) 9:45 AM PMI Composite final (September) 9:45 am S & P PMI Services SA final (September) 10am Standing Orders (August) 10am Factory orders (August) 10 a.m. ISM Services PMI (September) Earnings: Constellation Brands Friday, October 4 8:30 AM Hourly Earnings Preliminary (September) 8:30 AM Average Preliminary Work Week (September) 8:30am (September) 8:30 am Private Non-Farm Payroll (September) 8:30 AM Unemployment Rate (September) — CNBC’s Nick Wells contributed reporting.
