NEW YORK — September was supposed to be ugly for financial markets. NEW YORK — September was supposed to be ugly for financial markets. ADVERTISING The prospects of a U.S. attack on Syria and less economic stimulus from the Federal
NEW YORK — September was supposed to be ugly for financial markets.
The prospects of a U.S. attack on Syria and less economic stimulus from the Federal Reserve only added to investor worries going into September, which historically is the worst month of the year for stocks.
Instead, the Dow Jones industrial average is up 3.3 percent so far this month, even after it slipped 26 points, to 15,300.64 on Thursday. The Standard & Poor’s 500 index is up 3.1 percent this month, after falling six points Thursday to 1,683.42.
The S&P 500 rose for seven straight days before Thursday, its longest winning streak since July. The Dow climbed three straight days before Thursday’s loss.
Another positive sign for markets is the CBOE Volatility Index, sometimes referred to as “Wall Street’s fear gauge.” When the VIX, as it is better known, moves higher, it means investors expect more volatility in the next 30 days. It is down more than 15 percent this month. Gold, another signal of investor fear, is down more than five percent.
What happened to gloomy September?
The recent de-escalation of the U.S.-Syria crisis combined with a calming in the bond market has provided fuel to lift stocks, market strategists and investors said. Expectations of stronger corporate earnings are also helping out stocks, investors said.
While the ultimate fate of a U.S. attack on Syria is unknown, it looks like an immediate missile strike isn’t happening soon. Syrian President Bashar Assad said Thursday his government has agreed to surrender its chemical weapons in response to a Russian proposal.
It’s also important to look at what’s happened in the bond market the last couple of weeks, said J.J. Kinahan, chief strategist at TD Ameritrade.
The yield on the 10-year Treasury note soared from 1.63 percent in early May to 3 percent last week. Bond prices fall as yields rise. Most investors have become more comfortable with the Fed’s plan and do not believe the central bank will reduce its bond purchases as much as originally anticipated, several investors said. The Fed is buying $85 billion of bonds each month. It could limit purchases to $75 billion or $80 billion a month, instead of $55 billion.
Investors are looking ahead to slow but steady growth in corporate earnings, as third-quarter earnings season starts up in October.
LPL’s White pointed to stronger-than-expected manufacturing and service industry reports from the Institute for Supply Management last week as another reason why stocks have performed so well.
