CNBC Daily Open: Oversold in September, bounce in October?

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Bad quarter for markets
U.S. stocks were mixed Friday, with the Nasdaq Composite the only major index to inch up. But all indexes fell for the quarter. Europe’s Stoxx 600 added 0.38%, but likewise ended the quarter 2.9% lower — its worst quarterly performance for a year. Meanwhile, euro zone inflation fell to 4.3% in September, according to flash estimates. That’s the lowest annual figure since October 2021.

PCE inched up
The personal consumption expenditure index for August rose 3.5% from a year ago and 0.4% for the month. Stripping out food and energy, core PCE increased an expected 3.9% and a lower-than-forecast 0.1% — the smallest monthly increase since November 2020. The PCE is the Federal Reserve’s preferred measure of inflation as it measures consumer behavior rather than just prices.

Shutdown suspended
The U.S. Senate passed a last-minute spending bill Saturday, narrowly avoiding a government shutdown. However, the bill merely allows the U.S. government to stay open — and lawmakers to thrash out a more permanent funding legislation — for 45 more days. The bill notably leaves out new funding for Ukraine’s ongoing war with Russia.

Auto strikes expand
The United Auto Workers union expanded its strikes Friday, halting work at another Ford plant and an additional GM Plant. That amounts to 6,900 more autoworkers joining the roughly 18,300 already on strike. Stellantis was spared from additional strikes, said UAW President Shawn Fain, because of the company’s “significant progress” in negotiations with union members.

[PRO] Jobs week
This week’s all about the labor market. The Job Openings and Labor Turnover Survey for August comes out Tuesday, giving an insight into how many workers voluntarily left employment — a key indicator of employees’ confidence in finding a new job. And September’s jobs report will be released Friday, showing if the jobs market is still tight, as recent data on jobless claims have suggested.

Even a cooler-than-expected core PCE reading— an increase of just 0.1% for the month! — couldn’t cheer investors.

Squeezed by September’s seasonality, stocks mostly fell Friday. The S&P 500 lost 0.27%, the Dow Jones Industrial Average fell 0.47%, but the Nasdaq Composite climbed 0.14%.

All three indexes ended September in the red. The S&P was down 4.87% and the Nasdaq fell 5.81% — both indexes’ worst monthly performance since December. The Dow lost 3.5%, its worst showing since February.

When viewed on a quarterly basis, the numbers are actually better, indicating how bad September was for stocks. The S&P retreated 3.65%, the Dow declined 2.62% and the Nasdaq sank 4.12%, its biggest fall since the second quarter of 2022.

A “deeply oversold condition is starting to develop,” Wolfe Research analyst Rob Ginsberg said in a Thursday note. Just 15% of stocks are trading above their 50-day moving average, said Ginsberg.

It’s an observation echoed by Adam Turnquist, chief technical strategist at LPL Financial. Turnquist noted that the relative strength index of the S&P — a measure of the momentum of stocks — slid to the lowest level in 12 months, suggesting stocks reached oversold levels this week.

While being oversold doesn’t guarantee stocks will bounce, that condition suggests stocks are cheap relative to their recent price range, making it “easier for [stocks] to go higher,” Katie Stockton, founder and managing partner at Fairlead Strategies, told CNBC. This might be a good time for intrepid investors to wade into the waters.

After all, October’s historically a winning month for stocks, according to data from the Stock Trader’s Almanac. Between 1950 and 2021, the S&P has ended October 0.9% higher on average. Here’s hoping October brings some relief to the scorching summer heat we’ve had to endure in markets.