Will the S&P 500 Gain Pace in the Final Week of September?

As September nears its end, stocks are witnessing a downward trend. All three major indices are staring at losses as we enter the last week of the month. The Dow Jones Industrial Average index has fallen by 2.2%, the S&P 500 has declined by 4.2%, and the Nasdaq Composite has seen a 5.9% reduction in September. 

Let’s see what will impact the equity markets in the upcoming week.

 

The U.S. government shutdown 

This week, the potential government shutdown in Washington remains a significant concern for markets. The week commences with Congress uncertain about finalizing a spending bill before the Saturday deadline, raising concerns over a potential halt in government operations.

A prolonged shutdown might result in temporary layoffs, affected benefits, or a possible slowdown in economic growth. The House, led by Republicans, did not proceed with a funding scheme before taking a weekend break. 

This was due to Speaker Kevin McCarthyU+02019s inability to gain the support of conservative members demanding significant expenditure reductions. "ItU+02019s hard to predict whatU+02019s next," said Senate Majority Whip Dick Durbin, D-Ill., during his appearance on CNN’s “State of the Union” this past Sunday.

 

Is the Hollywood writerU+02019s strike about to end?

After an extended strike lasting almost 150 days, Hollywood writers and producers have inked a preliminary labor deal. While specifics of the agreement, achieved after two days of weekend negotiations, remain undisclosed, it still requires ratification by the Writers Guild of America members.

The union informed its members that the deal covers “significant advancements and safeguards for writers across all sectors.” As the entertainment industry evolves, screenwriters have advocated for a larger share of streaming profits and protections against artificial intelligenceU+02019s impact. 

The strike, coupled with an actorsU+02019 strike that began in July, has caused disruptions in TV and film schedules across prominent media firms.

 

Amazon enters the AI race 

Amazon (NASDAQ: AMZN) is going all-in on artificial intelligence development. The e-commerce giant has committed to a $4 billion investment in AI firm Anthropic, known for its chatbots that compete with OpenAI’s ChatGPT. 

This collaboration will establish Amazon Web Services (AWS) as AnthropicU+02019s chief cloud service provider and offer enhanced features to AWS users via Anthropic. With this move, Amazon aims to delve deeper into AI innovation, striving to stay competitive against industry giants like Microsoft and Alphabet.

 

Credit card losses in focus 

Goldman Sachs (NYSE: GS) reports a surge in credit card company losses, noting levels unseen since the 2008 financial crisis. From a low in September 2021, the current loss rate of 3.63% has escalated by 1.5 percentage points. Goldman anticipates these losses to increase even more, potentially nearing 5%. This forecast emerges as the U.S. credit card debt surpasses the $1 trillion mark.

 

Home price index and more 

On Tuesday, the Case-Shiller National Home Price Index and FHFA’s House Price Index for July will be released. According to Case-ShillerU+02019s projections, there was a 0.7% increase in July, marking six consecutive months of positive growth after significant drops in the latter part of 2022. Annually, prices are anticipated to decrease by 1%, marking the fifth straight month of year-over-year reductions.

Rising mortgage rates, driven by the Fed’s interest rate increases, have peaked in more than 20 years, making homeownership unaffordable for many potential buyers. Coupled with a scarce housing inventory, the housing market is currently the least affordable in nearly four decades. Approximately 80% of U.S. residents believe itU+02019s not the right time to purchase a home.

The Bureau of Economic Analysis (BEA) is set to release the Personal Consumption Expenditures (PCE) Price Index for August on Friday. The index is the Federal ReserveU+02019s favored measure of inflation. Prices in August are expected to have gone up by 0.5%, a growth from JulyU+02019s 0.2% increment. 

Annually, a 3.5% rise is predicted, a speed-up from July’s 3.2%. Excluding the fluctuating food and energy costs, the core prices probably increased by 0.2% month-to-month and 3.9% year-to-year.

The Fed prefers the PCE Price Index over the Consumer Price Index (CPI) because it better reflects the actual spending patterns of consumers. The Fed aims to maintain a 2% annual PCE inflation rate, aligning with its dual objectives of stable prices and maximum employment.