After a resilient performance, the market is showing signs of potential weakness on Wednesday, with traders adopting a defensive stance ahead of significant economic and corporate events slated for the remainder of the week. Early Wednesday trading sees index futures modestly lower. The day’s economic calendar is relatively light, featuring only routine releases like the weekly mortgage application data and new homes sales report for August. It will be intriguing to observe if the recent decline in mortgage rates has boosted mortgage application volume this week.
Micron Technology Inc.’s (MU) earnings report is taking center stage as investors seek insights into demand for artificial intelligence (AI) technology. In pre-market trading on Wednesday, the SPDR S&P 500 ETF Trust (SPY) dipped 0.07% to $570.92, while the Invesco QQQ ETF (QQQ) fell 0.19% to $484.46, according to Benzinga Pro data.
Tuesday’s session saw a positive close for U.S. stocks despite early jitters stemming from the unexpectedly low September consumer confidence reading. Jamie Cox, Managing Partner at Harris Financial Group, commented on the decline, stating, “It’s never good to see consumer confidence fall this much.” Cox attributed the weakness to concerns surrounding the upcoming election, escalating global conflicts, and persistently high food and credit costs. He added that the 50 basis-point Fed funds rate cut last week appeared more appropriate in light of these data points.
After an initial surge, the major indices reversed course following the release of the consumer confidence data. However, a V-shaped recovery brought the tech-heavy Nasdaq Composite and the broader S&P 500 Index back up, leading to sideways trading in the afternoon. Nvidia Corp. (NVDA) contributed to the rebound with a near 4% gain, providing a boost to both indices. China’s stimulus measures also maintained a risk-on sentiment. The Nasdaq Composite closed above the 18,000 mark for the first time since late July, while the S&P 500 reached fresh intraday and closing highs. Despite volatility throughout the day, the 30-stock Dow Industrials Average also achieved new intraday and closing highs.
With September 22, the first day of autumn, now behind us, the historically challenging period for the market is drawing to a close. LPL Financial Chief Technical Strategist Adam Turnquist noted that with less than five trading sessions left in September, stocks are on track to outperform historical averages for the month, barring any major market-moving events. He pointed out that the S&P 500 is up 1.2% month-to-date, defying the typical average decline of 0.7% since 1950 (the past four years saw declines of 4.9%, 9.3%, 4.8%, and 3.9%). This positive performance bodes well for the fourth quarter, according to Turnquist, who added, “Based on historical performance for the S&P 500, strong performance and momentum in the first nine months of the year could signal more gains ahead.” He further stated that over the last 75 years, the fourth quarter has yielded negative returns only eight times when momentum was strong during the first three quarters. In four of those eight years, returns for October to December were only slightly lower, within the range of 0% to -1.5%. The largest fourth-quarter decline following positive performance through September occurred in 1987, which included the infamous “Black Monday” market crash on October 19, when the S&P 500 plummeted over 20% in a single day.
Looking ahead, Turnquist identifies Fed policy decisions, the highly anticipated presidential election, and third-quarter earnings as major market catalysts.
The economic calendar features the Mortgage Bankers Association’s weekly mortgage application volume data at 7 a.m. EDT. In the week ending September 13, mortgage application volume surged 14.2% week-over-week on a seasonally adjusted basis, fueled by a 30-year fixed mortgage rate of 6.15%, the lowest since September 2022. At 10 a.m. EDT, the Commerce Department will release its August new home sales report. The consensus estimate calls for a seasonally adjusted annual rate of 700,000, down from the 739,000 rate in July. The Energy Information Administration’s weekly petroleum status report is due at 10:30 a.m. EDT. The Treasury will auction five-year notes at 1 p.m. EDT, and Federal Reserve Governor Adriana Kugler is scheduled to speak at 4 p.m. EDT.
In the stock market, Trump Media & Technology Group Corp. (DJT) surged around 7% in pre-market trading, building on Tuesday’s gains, following the expiration of the initial public offering lock-up period for insiders. Meta Platforms, Inc. (META) shares are likely to attract attention as the two-day Meta Connect technology-focused event kicks off on Wednesday. Cintas Corporation (CTAS) is set to announce its financial results before the market opens, while H.B. Fuller Company (FUL), Micron, Jefferies Financial Group Inc. (JEF), and Worthington Enterprises, Inc. (WOR) are among those reporting after the close.
Commodities markets show crude oil futures moving lower but remaining above the $71-a-barrel level, while gold futures continue to shine in record territory. Bitcoin (BTC/USD) remained relatively flat around the $63.5K level. The 10-year Treasury note climbed 1.7 points to 3.753%. Asian markets traded mixed, with China, Hong Kong, and Taiwan extending their gains amid continued optimism surrounding the stimulus measures announced by the People’s Bank of China this week. Most other Asian markets closed lower. European stocks weakened in early trading on Wednesday.
