september market trends and economic apprehensions
September has once again proven to be a tumultuous month for financial markets, keeping investors and traders anxious. Traditionally, September has posed challenges for equities, and this year is no exception. The S&P 500 Index fell by 4.3% last week, marking its worst weekly performance since September 2022, which saw a decline of 4.7%. The technology-focused Nasdaq Composite performed even worse, dropping 5.77%, reflecting its sharpest weekly loss since January 2022.
The market’s anxiety arises from two primary issues. Firstly, there are increasing indications that the U.S. economy is experiencing a slowdown. Secondly, there is significant anticipation surrounding the Federal Reserve, which is expected to announce a decision on interest rates soon, although this won’t happen until next week. This uncertainty continues to put traders and investors on high alert as they await the Fed’s reaction to the latest economic indicators.
September has a notorious reputation in market history. From 2014 to 2023, stocks have decreased in September on seven occasions. The Stock Traders Almanac states that it has been the poorest month for stocks overall since 1950. Nonetheless, even with the recent dips, the pullback in the S&P 500 and Dow Jones Industrial Average from their summer highs has been relatively subtle. The S&P 500 is down 4.6% from its intraday high of 5,669.67 on July 16, while the Dow has decreased by just 3% since reaching its peak of 41,585.21 on August 30.
Conversely, the Nasdaq and Nasdaq-100, largely composed of tech stocks, are exhibiting a different narrative. The Nasdaq has fallen 10.6% from its 52-week peak of 18,671.07 in July, officially entering correction territory. The Nasdaq-100 has experienced a nearly 11% decline since its July summit. These slides were somewhat anticipated, as both indexes were considerably overvalued in early July, making them susceptible to short-selling. For instance, Nvidia has seen a reduction of 27.3% since hitting a high of 0.76 on June 20.
In Australia, the ASX has also been affected by global market unease, particularly within tech stocks and growth sectors. Investors are keenly observing the implications of the U.S. Federal Reserve’s decisions on global markets, including the domestic scene. The Reserve Bank of Australia (RBA) is managing its own challenges, attempting to strike a balance between inflation concerns and the necessity to stimulate economic growth. As we move deeper into September, attention will remain on central bank strategies and their capacity to either stabilise or further disrupt markets.
forthcoming events and potential market influencers
Looking to the future, several significant events could potentially influence markets both globally and in Australia. One of the most awaited is Apple’s product launch event, labeled “It’s Glowtime,” set for Monday. Although this is primarily a U.S. event, Apple’s impact on global markets, including the ASX, is substantial. The tech titan is expected to announce new iPhone models, updates to the Apple Watch, and possibly advancements in artificial intelligence (AI). Given Apple’s prominence in the tech sector, any unexpected outcomes—whether positive or negative—could impact tech-centric indices like the Nasdaq and subsequently the ASX.
Apple’s stock has performed robustly in 2024, increasing by 14.7%, making it the third-best performer among the so-called “Magnificent 7” stocks, following Nvidia and Meta Platforms. However, Apple’s stock has not escaped the broader market slump, declining 3.6% last week. Despite this, it remained one of the more resilient players in the group, with only Tesla performing slightly better, down just 1.6% for the week. Australian investors with stakes in tech equities, especially those holding shares in U.S. tech giants, will be attentive to the outcomes of this event.
On the earnings side, Oracle is slated to report on Monday, which could also affect market direction. The database leader is anticipated to report earnings of .32 per share, a rise from .19 a year prior, with revenue expected at .2 billion. Oracle shares have surged 34.5% this year, substantially outpacing the S&P 500 and Nasdaq. For Australian investors, Oracle’s results may provide insights into the overall health of the tech sector, especially in cloud computing and enterprise software, sectors where Australian firms like Atlassian and Xero also compete.
In addition to Oracle, two other companies that warrant attention are GameStop and Adobe. GameStop, the video-game retailer, has seen its shares increase by 36% this year, yet the consensus forecast for this quarter indicates a loss of 8 cents per share, compared to a loss of 3 cents a year earlier. Revenue is expected to fall by 23% to 5 million. Meanwhile, Adobe, a major player in digital imaging and cloud services, is expected to report earnings of .62 per share, up from .98 a year ago, with revenue projected at .4 billion. Adobe’s shares have faced difficulties this year, down 5.5%, but exceeding earnings expectations could provide a much-needed lift.
For Australian investors, these earnings announcements will be scrutinised closely, particularly for any indications of weakness or strength within the tech sector. The ASX has its own tech stars, and any significant movements in U.S. tech stocks could sway sentiment locally. Furthermore, with the Australian economy confronting its challenges, including inflation concerns and a potential downturn in consumer spending, the performance of global tech giants could provide clues about broader market tendencies.
Apart from corporate earnings, two major economic reports are due this week that could inject volatility into the markets: the U.S. Consumer Price Index (CPI) on Wednesday and the Producer Price Index (PPI) on Thursday. These reports will be crucial in shaping the expectations for the Federal Reserve’s upcoming meeting on September 17-18. The consensus predicts a 25-50 basis point cut in its key interest rate, but any surprises in the inflation data could change that outlook. Australian markets will be closely monitoring this, as the RBA’s rate decisions are often swayed by global economic conditions, particularly those originating from the U.S.
In Australia, the economic calendar is relatively sparse, but investors will be vigilant regarding local data releases, especially concerning employment and consumer confidence. With the RBA having paused its rate increases, any signs of economic weakness could prompt further dovish moves, which would impact sectors like real estate and consumer discretionary. Additionally, commodity prices, particularly iron ore and energy, remain a focal point for Australian markets, as changes in global demand could influence the ASX’s resource-heavy indices.
