Dow Adds 300 Points, But Ends September in the Red

What’s happening: US stocks settled higher on Wednesday but recorded their first monthly loss since March.

What happened: Since 1950, September has proved to be the worst month for stocks. This year was no different, with several Wall Street stocks recording sharp declines.

Investors remained concerned about the lack of progress in Washington’s next fiscal stimulus plan, while tech stocks booked sharp losses due to overvaluation issues.

Why it matters: Wall Street was expected to begin the trading day yesterday on a lower note, with stock futures pointing towards a downbeat open. Moreover, the chaos at the first Presidential debate did not inspire much confidence. Investors also remained concerned about the increase in covid-19 cases and the delay in the US government announcing its next relief package.

Despite all these concerns, stocks gained through the last trading day of September as investors cheered strong economic reports. Pending home sales jumped 8.8% in August, while GDP growth for the second quarter was revised to a contraction of 31.4%, from the earlier reading of 31.7%.

Meanwhile, ADP data showed that 749,000 private-sector jobs were added in September, making it the best reading in three months. The strong ADP reading provides hope for Friday’s all-important NFP (nonfarm payrolls) report.

Investors also cheered encouraging covid-19 treatment news, as Regeneron Pharmaceuticals said its experimental drug helped in improving symptoms in non-hospitalised patients.

As a notoriously bad month for trading ends, investor concerns remain. Markets are now doubtful of another round of stimulus being announced before the Presidential elections in November. Investors are also on tenterhooks as the runup to the Presidential elections is likely to be heated.

The Dow Jones index climbed 329.04 points to finish at 27,781.70 on Wednesday, but closed the month lower by 2.3%. The S&P 500 index rose 0.8% to settle at 3,363, while the Nasdaq 100 closed at 11,167.51, recording a 0.7% gain. The S&P 500 and tech-laden Nasdaq 100 booked losses of 3.9% and 5.2%, respectively, for September. However, on a quarterly basis, the indices notched gains, with the Dow adding 7.6%, S&P 500 rising 8.5% and Nasdaq surging 11%.

What to watch: Investors await a basket of economic reports from the US, including personal spending, personal income, initial jobless claims, manufacturing PMI and construction spending.

Jobless claims are expected to ease to 850,000 in the recent week, versus the previous reading of 870,000. Analysts expect personal income to decline 2.4% in August, while spending is estimated to rise 0.8%. Construction spending is projected to increase 0.8% in August and the ISM manufacturing PMI is expected to improve to 56.3 in September.

Gold will be in focus today, after closing lower on Wednesday.

Context: Gold came under pressure yesterday due to strength in the US dollar. Despite the decline, the bullion notched gains for the eighth straight quarter.

Details: The US dollar rose on Wednesday despite the messy Presidential debate between Donald Trump and Joe Biden ahead of the November 3 elections.

Of late, gold has been on a downturn, with a strong US dollar making the yellow metal less compelling for overseas buyers. The US dollar index, which measures the greenback’s performance versus six major currencies, added around 1% last month.

Gold prices briefly traded above $1,900 earlier in the session. However, strong economic data from the US, especially the ADP report showing strong additions in private sector jobs, resulted in the yellow metal settling lower at the end of the day.

December gold declined $7.70 to close at $1,895.50 an ounce on Wednesday, losing 4.2% for September. December silver declined 3.9% to settle at $23.494 an ounce in the previous session, recording a decline of around 18% for the month.

Over the three-month period ending September, the yellow metal added 5.2%, while the white metal surged 26%.

What to watch: Markets will keep an eye on the US government’s moves related to fresh stimulus plans. Various economic reports from the US are also expected to remain in focus today. Gold futures traded slightly higher by 0.1% at $1,897 in the Asian session.

Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, French 40 and German DAX 30 down by 0.53%, 0.59% and 0.51%, respectively.

Italy’s manufacturing PMI and unemployment rate, France’s manufacturing PMI and new car registrations, Germany’s manufacturing PMI, Eurozone’s manufacturing PMI, unemployment rate and industrial producer prices, UK’s manufacturing PMI, South Africa’s manufacturing PMI and vehicle sales, Spain’s new car sales, Mexico’s business confidence and manufacturing PMI, Canada’s value of building permits and manufacturing PMI, Brazil’s manufacturing PMI and balance of trade as well as the US Challenger job cuts and EIA’s natural gas stockpiles.