Stock Market Week of Sept. 9 – What to Expect, How to trade

The stock market began September on a somber note, with significant declines across all major indices during the shortened holiday week. Widespread selling activity caused the S&P 500 to drop below its 50-day moving average. This downward trend was attributed to routine consolidation following a substantial rally, compounded by concerns over a weakening labor market and uncertain economic growth prospects. The release of the August Non-Farm Payrolls report on Friday further fueled bearish sentiment.

Weakness in the semiconductor sector further contributed to the prevailing negative sentiment. The PHLX Semiconductor Index (SOX) plunged by 12.2% last week. Among the significant players,Broadcom (AVGO)saw a notable decline of 15.9% following guidance that fell short of expectations, exacerbating fears of a slowdown in growth for many high-valued semiconductor stocks, includingNvidia (NVDA).

Last week’s market activity led to a 7.1% drop in the S&P 500 information technology sector, making it the worst performer of the week. It was followed by energy (-5.6%), communication services (-5.1%), and materials (-4.8%). The only sectors to close higher this week were the rate-sensitive real estate sector (+0.2%) and the consumer staples sector (+0.6%).

Key macro economic data, we will be watching this week

We have summarized key macroeconomic events and data releases that we believe will be crucial in predicting the stock market’s direction in the coming days:

Monday, September 9, 2024

• China: Inflation Rate (YoY and MoM) for August. The current estimates for China’s inflation rate in August 2024 are around 0.7% year-over-year. This follows a lower rate of 0.5% in July 2024.
• United States: Wholesale Inventories for July and Consumer Inflation Expectations for August. The current estimates forU.S. wholesale inventories for July 2024indicate that they edged up by 0.3% month-over-month to approximately $905 billion. This follows an upwardly revised 0.2% rise in June 2024.

Tuesday, September 10, 2024

• Australia: Westpac Consumer Confidence Index for September and NAB Business Confidence for August.
• China: Balance of Trade, Exports, and Imports for August.
• Germany: Inflation Rate (MoM) for August. The current estimates for Germany’s inflation rate in August 2024 indicate a year-over-year increase of 1.9%. This is a slight decrease from the previous month, with consumer prices expected to decline by 0.1% compared to July 2024. The core inflation rate, which excludes food and energy, is estimated to be 2.8%.

Wednesday, September 11, 2024

• United Kingdom: GDP Growth Rate (MoM) for July.
• United States: Producer Price Index (PPI) for August. The estimates for the U.S. Producer Price Index (PPI) for August 2024 suggest a year-over-year increase of 2.3%. On a month-over-month basis, the PPI is expected to rise by 0.2%. Given that the PPI is a key indicator of inflation at the wholesale level, amoderate increasesuggests that inflationary pressures are relatively contained. This aligns with the Fed’s recent stance, where most officials have indicated a preference for cutting interest rates if inflation continues to cool. The Fed minutes from their July meeting revealed that a majority of policymakers favored a rate cut in September, provided inflation data remained favorable. If the U.S. Producer Price Index (PPI) for August 2024rises significantly higher than expected,it could indicate stronger inflationary pressures at the wholesale level. This scenario might prompt the Federal Reserve to reconsider its plans for an interest rate cut in September 2024.

Thursday, September 12, 2024

• Euro Area: ECB Interest Rate Decision.
• United States: Consumer Price Index (CPI) for August. The current estimates for the U.S. Consumer Price Index (CPI) for August 2024 suggest a year-over-year increase of 2.8%. On a month-over-month basis, the CPI is expected to rise by 0.2%.

Friday, September 13, 2024

• United States: Retail Sales for August and University of Michigan Consumer Sentiment Preliminary for September. The current expectations for theUniversity of Michigan Consumer Sentimentsuggest a slight increase to 68.0. This is a modest rise from the previous month (67.9).

We anticipate another tumultuous week in the stock market, characterized by high volatility. This expectation stems from the increasing uncertainty surrounding the upcoming interest rate decision scheduled for September 17-18. Investor reactions to this week’s macroeconomic data releases are likely to vary. Therefore, we recommend taking small trading positions until there is more clarity regarding the trends in stock indices. As we approach the 100-day moving average (MA) in theS&P 500 (SPX) on a Weekly Chart,we intend to adopt a more aggressive stock picking strategy. However, given the potential risk of a decline to 5,154, we will maintain a cautious approach, will wait-and-see, and let the market come to us.

Earnings for the Week

• Monday:ORCL
• Tuesday: GME, PLAY
• Wednesday: MANU, VRA, OXM
• Thursday: BIG, SIG, KR, CAL,ADBE, RH
• Friday: None

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