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Major Indices Up 2%+ as Q4 Begins

We start off the first day of trading for the week and for the 4th quarter in a decidedly non-September fashion: up, way up. The Dow, which reached intra-day highs around +900 points, closed off that but stayed very high: +764 points, +2.66%. The S&P 500 performed almost as well, +2.59%. The Nasdaq grew 239 points, +2.27%, while the small-cap Russell 2000 swelled +2.65%.

Our current three-quarter losing streak on the S&P and Nasdaq is the worst run for the markets since the Great Recession, back in late 2008. For Dow this had been the worst performance since 2015. So a nice bounce-back from fresh bear-trading levels is more than welcome. We don’t expect 2%+ gains every trading day, but today really put the brakes on our negatively biased environment.

It wasn’t just exiting September in bear territory, either: the UK announced it is reversing its recently announced tax cut initiative (with interest rates rising and most consequential central banks actually tightening monetary policy, not loosening it). Assisted by OPEC+ announcing it plans to trim production to keep prices falling further, both the WTI and Brent crude priced were well above $80 per barrel. And with Q3 earnings results just around the corner, “hope springs eternal,” even in autumn.

October is known as a “bear market killer” based on the historic numbers — even more so in a midterm election year, which this happens to be. That said, Q3 earnings season is expected to bring lots of ratcheting down expectations for the quarter to be reported as well as lower guidance, so perhaps we’re not making apples-to-apples comparisons with what would be considered “regular” trading years.

Earlier today, the final read on S&P Global Manufacturing PMI ticked up 20 basis points (bps) to 52.0 for last month, while ISM Manufacturing slipped almost two full percentage points month over month to 50.9%. Both are still solidly above the “50-line” between expansion and contraction. Construction Spending for August, however, was much lower than expected, -0.7% versus -0.2% consensus and -0.6% the previous month.

Tomorrow morning, we get new JOLTS data and Factory Orders, all for August. The JOLTS report precedes the ADP ADP private-sector payrolls Wednesday and the Employment Situation data Friday from the U.S. government. We will continue to sift through everything in order to give us all the best chance at taking advantage of makret preferences.

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