Investors Brace for September

U.S. equity markets closed out the month of August with little to show for themselves. In fact as a result of yesterday’s anemic performance the S&P 500 closed out the month in negative territory. All three major US equity indices lost ground on accelerating volume yesterday. The Dow Industrials led the way lower shedding 0.30%. The S&P 500 slipped 0.24% and the Nasdaq Composite lost 0.19%. Volume rose dramatically on the NYSE (+21.74%) and the Nasdaq (+11.02%). Yesterday’s negative price performance coupled with rising volume is an indication that my recent shift in outlook from “confirmed uptrend” to “uptrend under pressure” remains intact. Equity markets are on tenterhooks at the moment, residing fractionally below their respective 52-week and record highs, hardly the way you want to enter the month of September, a month notorious for delivering poor equity market performance.
Economic data releases loom large for investors with several dominant releases; Weekly Jobless Claims (c. 265k), Motor Vehicle Sales (c. 17.1M), Productivity and Costs (c. -0.6%) and (c. 2.1%), PMI Manufacturing, and the ISM Mfg. Index (c. 52.2). All of these releases matter but one rises in importance over the others: Productivity and Costs. In particular the “Costs” component of the equation because it speaks directly to inflation. Friday will be dominated by the Employment Report. Consensus is calling for a monthly gain of 175,000. If the cost component of the Productivity Report is hotter than consensus on Thursday and if Friday’s August Employment report reflects a meaningful gain over consensus of 175k, look for financials to outperform the broader market in the near term in anticipation of the increased likelihood of the Fed moving on rates – possibly this month.

Continue reading what’s ahead and calls from Bill Gross on the Global markets Advisory Blog GMAG

flickr photo: Steven Snodgrass