It’s going to be hard to count on another strong month for stocks after September’s performance. The third quarter’s final month, often regarded as the weakest month of the year for stocks, has been surprisingly good for investors. The major market averages were on track as of Friday to close it out with a robust advance, helped by the Federal Reserve’s big rate cut last week. Both the Dow Jones Industrial Average and S & P 500 have broken out to new highs this month. The 30-stock Dow closed above 42,000 for the first time ever, while the broader index did the same, climbing above 5,700. But investors are on edge heading into October, the most volatile month for stocks, with the S & P 500 posting an average daily move of 1.3% up or down, according to a CNBC Pro analysis of historical market data going back to 1950. Consequently, traders have to navigate a historically bad month for equities — typically made worse during a U.S. presidential election year — and contrarian sentiment that has many worried about a market pullback or even a correction. Throw into the mix rising geopolitical risks from conflict in the Middle East and war in Europe, as well as the potential for further cracks in the domestic labor market, and the outlook for U.S. stocks next month appears tenuous at best. “Can SPX sidestep two typically weak months in the election cycle calendar?” BTIG chief market technician Jonathan Krinsky asked this week, referring to the S & P 500. “Unlikely.” .SPX YTD mountain S & P 500 Regardless, stocks were on track for a winning month and a winning quarter. As of Friday’s close, the Dow and the S & P 500 were on course for a 1.8% and 1.6% gain in September, respectively, while the Nasdaq Composite had gained 2.3%. On a quarterly basis, the blue-chip Dow was the outperformer, up 8.2%. The S & P 500 had risen 5.1%, while the tech-heavy Nasdaq Composite was higher by 2.2%. September jobs report Chief among the catalysts that might move prices in October is the September jobs report that’s due in one week. Investors are laser-focused on the strength of the labor market, especially after the latest major inflation reading released Friday showed again the Fed’s fight against pricing pressures may be won. “As simple as it sounds, I think it’s really going to come down to labor market data,” Adam Turnquist, chief technical strategist at LPL Financial, said of the stock market’s short-term direction. The U.S. economy is expected to have added 144,000 jobs this month, up from 142,000 jobs in August, according to a Dow Jones estimate. Meanwhile, the unemployment rate is forecast to have held steady at 4.2%. Turnquist worries that a weak jobs report that casts doubt on investors’ expectations for a soft landing — where growth slows and inflation eases but the economy skirts a recession — could weigh on stock prices. On the other hand, the impact of a stronger report on equities is likely to be more muted, he said. Seasonal weakness Even with stocks breaking out to new records in late September, and bulls firmly in control , skeptics are waiting for a better spot to start putting more money to work in the market. They’re concerned the market right now is showing signs of exhaustion, given the fewer number of stocks making new highs, or the fact that semiconductors, which have outpaced the broader market this year, have ceded their leadership. LPL Financial’s Turnquist expects a better buying opportunity will come in October, possibly if the S & P 500 retests its September lows at 5,400, and especially if it falls to its 200-day moving average, which was last at around 5,200. For the S & P 500, those levels represent declines of about 6% to 9%, as of Friday’s close. The broader index itself was last hovering above 5,700. Similarly, Jeff Hirsch, editor of the Stock Trader’s Almanac, said he expects the S & P 500 could fall 5% to 10% over the next several weeks but that he’s bullish into year-end. Hirsch said he wouldn’t be surprised if the broader index notched new all-time highs, with 6,000 a “reasonable” level after some of the uncertainty is removed from investors’ minds. “I’m looking to get pretty long pretty soon,” he said. Week ahead calendar All times ET. Monday, Sept. 30 9:45 a.m. Chicago PMI (September) 10:30 a.m. Dallas Fed index (September) 1:55 p.m. Federal Reserve Chair Jerome Powell speaks on the economic outlook at the National Association for Business Economics’ annual meeting in Nashville Earnings: Carnival Tuesday, Oct. 1 9:45 a.m. S & P PMI Manufacturing final (September) 10 a.m. Construction Spending (August) 10 a.m. ISM Manufacturing (September) 10 a.m. JOLTS Job Openings (August) Earnings: Lamb Weston , Nike , McCormick & Co. Wednesday, Oct. 2 8:15 a.m. ADP Employment Survey (September) Earnings: Conagra Brands Thursday, Oct. 3 8:30 a.m. Continuing Jobless Claims (09/21) 8:30 a.m. Initial Claims (09/28) 9:45 a.m. PMI Composite final (September) 9:45 a.m. S & P PMI Services SA final (September) 10 a.m. Durable Orders (August) 10 a.m. Factory Orders (August) 10 a.m. ISM Services PMI (September) Earnings: Constellation Brands Friday, Oct. 4 8:30 a.m. Hourly Earnings preliminary (September) 8:30 a.m. Average Workweek preliminary (September) 8:30 a.m. Manufacturing Payrolls (September) 8:30 a.m. Nonfarm Payrolls (September) 8:30 a.m. Participation Rate (September) 8:30 a.m. Private Nonfarm Payrolls (September) 8:30 a.m. Unemployment Rate (September) — CNBC’s Nick Wells contributed reporting.
