Contrary to the reputation September has about stock market returns, the US Stocks rallied stronger on Wednesday. US equities closed higher with Dow 30 up by 435.98 points and S&P 500 gaining 1.83% while Nasdaq clocked 2.14% on Wednesday. The small-cap Russell 2000 also showed strength and moved 2.21% higher than the previous day’s close.
Approximately 95% of the S&P 500 companies increased in value, with all sectors except energy finishing the day’s session in the green. Only four of the Nasdaq 100’s constituents declined as the tech-heavy index rallied by more than 2%. Nasdaq stock list with maximum returns on Wednesday were DexCom Inc.(7.73%), Match Group (6.85%), Ross Stores (6.25%), Netflix (4.84%) amongst other stocks.
On the Nasdaq Composite index, Imara (71.79%), Shuttle Pharmaceuticals Holdings (26.55%), Spero Therapeutics (26.55%), Pingtan Marine Enterprise (21.92%), Nutex Health (21.92%), Molecular Templates (21.83%), NLS Pharmaceutics (21.56%), Reata Pharmaceuticals (21.06%), Datasea (20.16%) were among the top gainers.
The reason for the US stocks to find buyers could be the pause in the global bond market selloff as Treasury yields halted a surge to multiyear highs. The one key factor the market is banking upon is the expectation of softer inflation and hence the US CPI numbers coming up on September 13 will be a keenly watched event.
On Wednesday, the industries with the best performers were airlines, retail, automobiles, chemicals, travel/leisure, credit cards, and software. Oil’s decline put pressure on the energy sector. Transportation, logistics, international mining, and tobacco stocks underperformed.
Since the June lows, the markets have already witnessed a bear market rally. More of such rallies may be seen until a firm base is formed and macroeconomic factors change for the better. Many strategists feel the increased inflation pressures that will force the Fed to maintain high-interest rates for an extended length of time have not been sufficiently offset by the declines in American stocks.
The US inflation data, which will be released on September 13, 2022, and the FOMC meeting of the Fed, which will take place on September 20–21, are the final two significant events in September. Most analysts predict that the Fed will increase rates by 75 basis points in September in order to manage inflation. If approved, a rate increase of 75 basis points would be the third in a row and would demonstrate the Fed’s unwavering commitment to containing inflation at all costs.
If one goes by history, September is the worst month of all because it has never been good for stock market investors.
It is uncertain whether the stock market will close in September 2022 with a decline in prices like it did in the past. In the months to come, new data flows may reveal the Fed Pivot option that was dismissed following Jackson Hole. Before the results of the upcoming quarter are released and as macroeconomic conditions change in 2023, stock market participants anticipate that the Fed’s activity will provide them with some guidance.