September ended on Thursday with one last selloff, securing stiff declines for the major indices this month and leaving us with lackluster results for the third quarter. But it looks like we won’t be starting October with a shutdown as Congress agreed on a short-term fix.
Stocks were ‘only’ down approximately 1.5% for September when we began this week, but rising yields and Washington waffling ramped up the pressure in the final few days. Plus, investors have always been a bit intimidated by ‘the worst month of the year for stocks’.
Well, it lived up to that moniker. The NASDAQ plunged by more than 5% in September as tech has been getting shellacked amid rising rates. The index is now stuck in a five-day losing streak, though it was ironically the best performer today by only slipping 0.44% (or about 63 points) to 14,448.58.
The S&P was down nearly 5% this month and dropped 1.19% on Thursday to 4307.54. The Dow slipped 4.5% over the 30 days, but had the worst final session with a plunge of 1.59% (or about 546 points) to 33,843.58.
The S&P did manage a very modest gain for the third quarter of 0.2%, but the NASDAQ was off around 0.4% and the Dow dropped 1.9%.
This afternoon Congress passed a short-term appropriations bill and sent it to the President’s desk. It only funds the government until Dec. 3, but it means that October won’t begin with a shutdown.
That leaves the debt ceiling situation as the most immediate concern for Washington. Treasury Secretary Janet Yellen said that October 18 was the deadline when the government would run out of money and default on its debt for the first time in history. The market is still not overly concerned and fully expects Congress to either raise or suspend it before the point of no return. But you can bet this market will start getting nervous the closer we get to that date without some resolution.
"It’s hard to believe that a default is even possible, but with all the nonsense we have seen out of Washington lately, who knows," said Jeremy Mullin in Counterstrike. "I still believe there is a very low probability of this, but stocks were sold today just in case."
Finally, Thursday means its time to check in with the jobless claims, though its been overshadowed this week by other things. Nevertheless, the print came to 362,000 instead of 335K, which marked a third straight week of missed expectations. It was also 11K more than the previous report.
Let’s hope for a better October!
Today's Portfolio Highlights:
Technology Innovators: The portfolio is now fully invested with 15 names after today’s addition of Computer Programs and Systems (NASDAQ:CPSI), which is in the business of electronic medical records. More specifically, it provides a complete health information and patient care system that encompasses the full spectrum of financial and clinical applications. The company has beaten the Zacks Consensus Estimate in three of the past four quarters with the most recent surprise being 28%. Rising earnings estimates makes CPSI a Zacks Rank #2 (Buy). Brian likes the company’s valuation and the earnings growth expectations of 136% for this year. Learn more about this new addition in the full write-up.
Options Trader: "All eyes have been on, and continue to be on, Washington. Looks like Congress got the continuing resolution done, thus avoiding a government shutdown. This was the easiest of all the bills that are trying to get passed this week. But it only funds the government until December 3rd. So they’ll be revisiting this again in a little over two months.
"Next is the debt ceiling. According to Treasury Secretary Janet Yellen, we have until October 18th before the government runs out of money. So there’s a bit of time left. But it won’t be as easy as the continuing resolution. The debt ceiling could either be increased or suspended. But after today's testimony by Secretary Yellen before the House Financial Services Committee, where she advocated for getting rid of the debt ceiling altogether, it’s unclear how Congress will proceed.
"Then we have the infrastructure bill and the reconciliation bill, not to mention the tax hikes to pay for it. Those remain up in the air. The deadlines for those were always arbitrary. But with so much money at stake, that could, or could not, be injected into the economy, the markets are paying close attention." -- Kevin Matras
All the Best,
Jim Giaquinto
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