The U.S. stock market has endured its most challenging month of the year, as September has followed its usual trend of negative risk sentiment. Both the SPDR S&P 500 ETF Trust (NYSE:SPY) and the Nasdaq-related Invesco QQQ Trust (NASDAQ:QQQ) closed the month 5% lower.
There has been a sell-off in bonds, with treasury yields experiencing significant upward movement, reaching their highest levels in over 15 years. The 10-year yield has surpassed 4.5%, while the 30-year yield is hovering around 4.7%.
Investor concerns about the Federal Reserve keeping interest rates high for a prolonged period are driving this surge. In September, the iShares 20+ Year Treasury Bond ETF (NYSE:TLT) plummeted by 8.7%, making it the worst month since April 2022 and the second-worst since January 2009.
Long-term treasury bonds have had their second-worst month since the global financial crisis, as shown in the chart.
On the political front, the ongoing stalemate over a deal to prevent a U.S. government shutdown is causing anxiety among market participants. Moody’s has issued a warning that the U.S. Treasury could face adverse credit consequences if a shutdown occurs.
The Senate Banking Committee has given its approval to the Secure and Fair Enforcement Regulation (SAFER) Banking Act, bringing the cannabis industry one step closer to banking access. This landmark bill aims to grant legal cannabis businesses access to banks and financial institutions that were previously off-limits to them. The next step for the bill is a full Senate floor vote.
JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon expressed concern about the potential scenario of interest rates surging to 7%. This development could have severe repercussions for American businesses and consumers.
The market’s expectations for the Federal Reserve remain unmoved by inflation data. The Fed’s preferred measure of inflation did not affect the markets significantly, with traders largely anticipating that the Fed will maintain interest rates in November.
The Writers Guild of America has reached a tentative agreement with studios and entertainment companies, benefiting over 11,000 screenwriters. The agreement includes significant increases in compensation for streaming content and minimum staffing requirements for television shows.
Federal student loan borrowers are preparing for the resumption of their monthly payments in October after a pause of more than three years due to the COVID-19 pandemic. This change could potentially result in new spending patterns and financial stress for nearly 44 million Americans.
In the stock market, the energy sector has once again claimed the top spot as the week’s best performer, driven by oil prices surpassing $90 per barrel. Shares of Exxon Mobil Corp. (NYSE:XOM) have reached new all-time highs.
Investors should keep an eye on the possibility of a U.S. government shutdown, which could halt official data releases. Additionally, ISM Manufacturing and Services PMI readings for September and the ADP private non-farm payrolls report will be closely watched. Several Fed speakers will also comment on monetary policy.
Earnings reports for large caps next week are relatively light, with companies such as McCormick & Company Inc. (NYSE:MKC), RPM International Inc. (NYSE:RPM), Constellation Brands Inc. (NYSE:STZ), Conagra Brands Inc. (NYSE:CAG), and Lamb Weston Holdings Inc. (NYSE:LW) announcing their results.
