Market Update: Tues, Oct 1, 2019 | LPL Financial Research

Daily Insights

Here comes October. U.S. stocks are higher this morning to kick off October. Stocks during the month of October have had a bad rap, mainly due to extreme declines in 1929, 1987, and 2008. However, the S&P 500 Index has performed well overall during this usually volatile month. In fact, October is actually the third strongest month on average for the S&P 500 over the past 20 years.

A long list of issues. Seasonality may be a tailwind here, but investors are battling a long list of trade and political issues globally with stocks near record highs. Among these global issues is Japan’s value-added tax (VAT) increase, which is scheduled to go into effect today. The S&P 500 was especially calm in September, but markets don’t stay calm forever, so we wouldn’t be surprised to see some volatility at these levels.

Treasury volatility dies down. Bonds around the world are declining this morning after an unusually weak debt auction in Japan, boosting the 10-year U.S. Treasury yield higher. Even though we’re seeing some movement in yields today, volatility in U.S. Treasuries has largely died down. The 10-year Treasury yield hovered around 1.7% last week, rising just four basis points (0.04%).

The state of global manufacturing. Global manufacturing continues to decline amid weakened demand, evidenced by the large swath of downward revisions in September manufacturing sector data this morning. U.S. manufacturing has been fairly resilient against global headwinds, but the cracks are starting to spread. In August, the Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index fell to 49.1, its first time in contractionary territory (below 50) since August 2016. We’ll cover the state of global manufacturing today on the LPL Research blog, including September ISM data, which will be released later this morning.

What does an impeachment mean for stocks? Speaker of the House Nancy Pelosi announced last week that she would support an impeachment inquiry into President Donald Trump. Over the past 150 years, only two presidential impeachment inquires have taken place — Richard Nixon in 1974 and Bill Clinton in 1998 — with very different results. Check out our LPL Research blog post highlighting S&P 500 returns during impeachment proceedings for more details.

 

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