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09-02-2019, 08:29 AM
What to Dread and Love in Stocks During ‘Bad News’ September
(Bloomberg) -- Everything from history to options expiration and buyback calendars may come into play in a September that’s expected to be volatile for U.S. stocks, strategists say.There’s a lot going on this month. U.S. tariffs on $110 billion of Chinese goods took effect Sunday, as did some retaliatory measures by China. Trade talks between the two countries are still planned to go ahead -- and economic data will be scrutinized for signs of any impact from the dispute. There’s a Federal Open Market Committee meeting on Sept. 18, and this week alone will feature speeches from Federal Reserve Chair Jerome Powell as well as numerous other officials. And then there will be the almost inevitable tweets from President Donald Trump.“The good news is August is finally coming to a close, but the bad news is that September is next,” said Ryan Detrick, senior market strategist at LPL Financial, in a note on Aug. 30. “Since 1950, September has been the worst month for the S&P 500 Index, which has dropped an average of 0.5% during the month.”While Detrick noted that the pattern has been different in the past 10 years -- with an average gain of 0.9% in the month -- he said the “burst of volatility” seen in August is expected to continue regardless. The Cboe Volatility Index, or VIX, averaged 18.98 in the month, compared with the average over the past two years of 15.35.BTIG LLC says the equity market may struggle to rise in the first half of the month, and that this may pressure the Fed to cut rates by 50 basis points in its next decision.“Near term, expect the volatile trading range (S&P 500 2,822-2,946) to prevail with the likelihood of lower ‘summer slide’ lows without positive geopolitical news prior to the Sept. 18 FOMC meeting,” chief equity and derivatives strategist Julian Emanuel wrote in a note dated Sept. 1. The U.S. benchmark gauge closed on Aug. 30 at 2,926.46. S&P 500 futures fell 0.2% as of 8:55 a.m. in New York, though the American equity market was closed for the Labor Day holiday.But Nomura’s Charlie McElligott predicts equities will head higher into mid-month before fading. Risk should trade higher into the expirations for VIX and equity options mid-month, with the market also getting a boost from accelerated corporate share repurchases ahead of a buyback “blackout” around the same time, he said.“We could then mark a local top which is fadeable, as the market historically tends to trade lower following the September expiry,” McElligott wrote in an Aug. 30 note. “The equities trades here are a setup to sell strength into/around the expected September mid-month peak in S&P 500, then use said down-trade thereafter to buy the dip ahead of the end-of-year ‘higher stocks’ seasonality.”LPL took up the theme of a year-end advance, as well.“If you’re looking for some good news, the past 15 times stocks were lower in August, the rest of the year was actually higher every single time,” Detrick noted.(Adds S&P futures in seventh paragraph.)To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.netTo contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Kurt SchusslerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
https://finance.yahoo.com/news/dread-love-stocks-bad-news-025929153.html?.tsrc=rss
(Bloomberg) -- Everything from history to options expiration and buyback calendars may come into play in a September that’s expected to be volatile for U.S. stocks, strategists say.There’s a lot going on this month. U.S. tariffs on $110 billion of Chinese goods took effect Sunday, as did some retaliatory measures by China. Trade talks between the two countries are still planned to go ahead -- and economic data will be scrutinized for signs of any impact from the dispute. There’s a Federal Open Market Committee meeting on Sept. 18, and this week alone will feature speeches from Federal Reserve Chair Jerome Powell as well as numerous other officials. And then there will be the almost inevitable tweets from President Donald Trump.“The good news is August is finally coming to a close, but the bad news is that September is next,” said Ryan Detrick, senior market strategist at LPL Financial, in a note on Aug. 30. “Since 1950, September has been the worst month for the S&P 500 Index, which has dropped an average of 0.5% during the month.”While Detrick noted that the pattern has been different in the past 10 years -- with an average gain of 0.9% in the month -- he said the “burst of volatility” seen in August is expected to continue regardless. The Cboe Volatility Index, or VIX, averaged 18.98 in the month, compared with the average over the past two years of 15.35.BTIG LLC says the equity market may struggle to rise in the first half of the month, and that this may pressure the Fed to cut rates by 50 basis points in its next decision.“Near term, expect the volatile trading range (S&P 500 2,822-2,946) to prevail with the likelihood of lower ‘summer slide’ lows without positive geopolitical news prior to the Sept. 18 FOMC meeting,” chief equity and derivatives strategist Julian Emanuel wrote in a note dated Sept. 1. The U.S. benchmark gauge closed on Aug. 30 at 2,926.46. S&P 500 futures fell 0.2% as of 8:55 a.m. in New York, though the American equity market was closed for the Labor Day holiday.But Nomura’s Charlie McElligott predicts equities will head higher into mid-month before fading. Risk should trade higher into the expirations for VIX and equity options mid-month, with the market also getting a boost from accelerated corporate share repurchases ahead of a buyback “blackout” around the same time, he said.“We could then mark a local top which is fadeable, as the market historically tends to trade lower following the September expiry,” McElligott wrote in an Aug. 30 note. “The equities trades here are a setup to sell strength into/around the expected September mid-month peak in S&P 500, then use said down-trade thereafter to buy the dip ahead of the end-of-year ‘higher stocks’ seasonality.”LPL took up the theme of a year-end advance, as well.“If you’re looking for some good news, the past 15 times stocks were lower in August, the rest of the year was actually higher every single time,” Detrick noted.(Adds S&P futures in seventh paragraph.)To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.netTo contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Kurt SchusslerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
https://finance.yahoo.com/news/dread-love-stocks-bad-news-025929153.html?.tsrc=rss