Stock Market Outlook: Buy the September Sell-Off Ahead of Next Rally

Sparking today’s selloff was this morning’s release of the August jobs report. According to the Bureau of Labor Statistics, the U.S. added 142,000 new jobs last month, falling far short of the 165,000 jobs economists’ anticipated. Additionally, the June and July jobs reports were downwardly revised by a combined 86,000. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.

1. You can see the full Zacks #1 Rank List or narrow it down to Zacks #1 Rank Stocks with a Value, Growth, Momentum or Income Style Score of A or B.
2. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month.
3. The next couple of months could determine whether the FOMC can navigate a so-called soft landing for the U.S. economy without tipping it into a recession.
4. Analyst earnings revisions continue to trend higher, historically a leading indicator for corporate earnings.

More Zacks Resources

Stocks ticked higher at Friday’s open but quickly reversed lower after the August jobs report ramped up worries about a cooling labor market. At the end of the day, the three main indexes were solidly in the red, with the S&P 500 wrapping up its worst week since March 2023. The S&P 500 is currently having its best earnings season since the fourth quarter of 2021. Companies have reported profit growth of nearly 11% on average in the second quarter of 2024, according to FactSet Research. And the average profit margin of 12.2% represents a 60-basis-point expansion from the prior year and a 70-basis-point expansion from the five-year average.

Find a Report

However, companies that rely on share repurchases to grow earnings have limited prospects. That information points to a cooling economy and serves as a reminder that a recession is still a possibility, albeit a remote one. In July 2024, economists surveyed by The Wall Street Journal put the odds of a recession within the next 12 months at 28%, the lowest estimate since 18% in January 2022. Analyst earnings revisions continue to trend higher, historically a leading indicator for corporate earnings. The Zacks #1 Rank List is the best place to start your stock search each morning. Each weekday, you can quickly see the Zacks #1 Rank Top Movers from Value to Growth, Momentum and Income, even VGM Score.

Zacks Mobile App

Strength in the Energy Generation/Storage business, balance sheet strength and focus on autonomous driving and affordable EVs are set to drive Tesla. Cullen/Frost’s branch expansion efforts in the Texas region will drive deposit and loan growth. Also, the expansion of the portfolio beyond oncology into immunology is a major positive. Lennar is poised to gain from dynamic pricing model, digital marketing, playbook strategies, land-lighter strategy and strong liquidity. Hewlett Packard’s efforts to shift its focus to higher margin offerings, strategic acquisitions and expansion of generative AI offerings are expected to drive the top and bottom lines in the long run.

Fed Decisions Are Affecting the Economy

However, Paré says that a financially-stressed household may worsen its situation by diverting money to sports betting. Sports betting apps now allow millions of Americans to put down serious money on the outcomes of games — and on in-game events such as which team will score first — all from the comfort of their phones. Adam Turnquist, chief technical strategist for LPL Financial, says historical market performance since 1950 suggests there’s no good reason for investors to “sell in May and go away” this year. The next couple of months could determine whether the FOMC can navigate a so-called soft landing for the U.S. economy without tipping it into a recession. “A cooler economy is limiting businesses’ ability to raise prices, which will help slow inflation in the second half of the year,” Adams says.

This is scarcely enough to cover the youngest of the Baby Boomers retiring per month. The previous trailing four-month average” That’s +227K. This demonstrates a clear erosion to the labor market. We’ve filtered the list for companies with a market capitalization of at least $100 billion. These are high-volume stocks whose earnings reports are often major trading events for options traders and day traders. After every other Fed meeting (including the September meeting), the central bank releases a summary of economic projections (SEP) showing staffers’ opinions of what the federal funds rate should be over the next few years. That growth is apparent in the stock prices of sports betting companies such as DraftKings (DKNG).

Hayes finds it encouraging that, based on internal NDR readings, the stock market, economy, and corporate earnings are showing no signs of being vulnerable to a sharp bear why white label crypto exchange software is the smart choice for startups market decline akin to what happened in 2022. With all this talk of a slimming labor force, we did see some monthly numbers come in a bit higher than expected. Hourly Wages month over month came in at +0.4%, 10 bps above the +0.3% estimate and doubling the +0.2% reported for July. This figure was balanced by a drop in labor force participation of men but a gain in women participation. Fortunately, S&P 500 companies have reported better-than-expected first-quarter earnings growth of 6% year-over-year, and they have remained resilient in a difficult inflationary environment.

In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis. Indeed, according to CME Group’s FedWatch Tool, futures traders weekly fixed income review are now pricing in a 71% chance the Fed will cut interest rates by a quarter-percentage point at its September meeting, up from 60% one day ago. Odds of a half-percentage-point cut fell to 29% from Thursday’s 40% probability. While the August jobs numbers are an improvement over July, they still show the broader trend in the labor market is lower, says Adam Hetts, global head of multi-asset at Janus Henderson Investors. “Overall, the report stays within the range of a slowing but not slow economy and doesn’t outright threaten the soft landing narrative nor scream 50 basis points (0.50%) in September cuts.”

Broadcom, Nvidia and other tech companies drove the market lower amid ongoing concerns that their prices soared too high in the boom What is msci index around artificial intelligence, and they dragged the Nasdaq composite down by a market-leading 2.6%. Apple (AAPL) stock succumbed to broad-market headwinds ahead of next week’s September product event, falling 0.7%. Several big announcements are expected from the tech giant, including the launch of the highly anticipated iPhone 16 series. Broadcom (AVGO) was a main contributor to the tech sector’s slide, with the shares falling 10.4% after the chipmaker reported earnings. While AVGO beat top- and bottom-line expectations for its fiscal third quarter, it issued an outlook for its fiscal fourth quarter that was just shy of what analysts are anticipating.

News & World Report and a regular contributor for Forbes Advisor and USA Today. Investors can already earn 5% or higher in online savings accounts heading into June, and those interest rates will likely remain elevated for at least the next several months. Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, says investors shouldn’t be too focused on the interest rate outlook that they lose sight of what truly matters—the economy.

New Downgrades: DLTR, NFG, ZUMZ, E, HCA, RH, YELP, HPE, PBH, LEN

Cuts to interest rates can boost investment prices, but the worry on Wall Street is that the Fed may be moving too late. If a recession does hit, it would undercut corporate profits and erase the benefits from lower rates. The S&P 500 dropped 1.7% to close out its worst week since March 2023.

As shown above, since 1984, the S&P 500 has returned a median of 14% during the 12-month period following the first rate cut in a loosening cycle. Lower borrowing costs should encourage consumer spending and business investments, which should drive strong financial results and share price appreciation across the stock market. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +23.68% per year. These returns cover a period from January 1, 1988 through August 5, 2024.