Red Days for stocks as summer passes

Red Days for stocks as summer passes

Stocks slipped yesterday under the weight of Apple and its suppliers after China banned iPhones from entering government buildings. When heavily weighted stocks in cap-weighted indexes go up, everyone rejoices, but when they go down… well you know .

Wake me up when September ends. “Summer has come and passed, the innocent can never last…” A great opening lyric from Green Day’s 2005 timeless ballad. The song, penned by Billie Joe Armstrong and bandmates was, sadly, about the passing of his father when he was a youth, but he may as well have written it about the historical performance of the stock markets in September. And, for the record, though I haven’t checked it, I am sure that I am not the first to use this tagline about September stock performance, and I will certainly not be the last. But, alas, I am feeling a bit “emo” on this dreary Friday on Wall Street, ahead of a stormy weekend, and on the heels of an oppressively hot and humid week in Gotham. Desperate folks try to extend their summer, if not for an extra week, by pretending that labor day “week” in the US is the unofficial last lick of summer. As I look at my now-dark-at-this-hour garden, I can make out the faint outlines of the thin layer of leaves on my lawn. Even if I pretend not to see those, I certainly noticed the “fall” traffic in my commute yesterday as eager workers trudged back to work to knuckle down until Thanksgiving, now ONLY 76 days away (in the US). Even if I was rocking out to Green Day blasting on my car stereo in order to avoid noticing the traffic, I did notice the sea of red painted across the gaggle of screens when I entered my office. I sat down in my chair, sighed, and whispered, “…September.”

You were not surprised when you checked the markets over your morning tea yesterday, because you READ MY NOTE, and you knew about the trouble brewing between China and the US in their underhanded trade war. You also knew about all the chip and components suppliers to Apple being negatively affected, as well. In many past notes, I have written about how the major stock indices are heavily influenced by Apple and its largest chip suppliers. A few weeks back, I gave you quantitative data that showed that August was a poor historical performance month for the S&P, but September… September topped the list for stinkers. Now, I don’t believe that there is any good explanation for this clear historical pattern, and I must remind you that past performance does not guarantee future performance, however, September didn’t exactly start out on solid footing.

It certainly didn’t help that treasury yields rallied at the start of the week and the ISM Services Index came in hot. China’s banning of Apple’s iPhones was the final blow. Bond yields are higher, Apple and its partners are under pressure, and the services sector remains hot. On that last item, remember that the sector remains a key inflation holdout, and Wednesday’s release showed marked increases in not only the topline number, but also its Prices Paid, Employment, and New Orders indexes. All of which were likely to displease the Fed hawks. On those hawks, some of them were not quite so hawkish yesterday with a few of them saying that they were pleased with where Fed policy stood at current. That could mean no hike later this month, though the market has already factored that in. It is nice to hear that from Fed officials to back up the markets. The kind words, however, were not enough to console the markets yesterday. Why? It’s hard to say, but it being September may have had something to do with it. You may be feeling a bit “emo” as well, but before you dig out your black eyeliner and ripped jeans, I want to remind you that historically, the next quarter, October through year’s end, is the best of the year, so don’t worry, you will be boogying out to ABBA soon enough. Stay focused.

WHAT’S UP OR down THIS MORNING

First Solar Inc (FSLR) shares are higher by +2.76% after analyst upgrades in the wake of yesterday's capital market day in which the company gave guidance that showed the company is booked to capacity through 2026, which was better than analysts were expecting. Potential average analyst target upside: +36.6%.

Adobe Inc (ADBE) shares are higher by +1.92% after Mizuho raised its rating to a BUY on “improving fundamentals,” with “GenAI” being a big growth factor. The company will announce earnings next week. Potential average analyst target upside: +1.0%.

YESTERDAY’S MARKETS

NEXT UP

• No economic data today, but next week we will get Consumer Price Index / CPI, Producer Price Index / PPI, Retail Sales, Industrial Production, and University of Michigan Sentiment.
• Fed Vice Chairman Michael Barr will speak today.