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Pre-Markets Look to Bounce Back in October

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Monday, October 3, 2022

Market participants -- we have finally worked our way through the month of September. It was promised to be a difficult one, both with the history of the month in the stock market being the worst of the year, as well as with a Fed meeting that some of us felt would bring a dovish pivot… boy, was that wrong!

As a result, we just experienced the worst trading month since March 2020, with the Dow -8.8%, the S&P 500 -9.3% and the Nasdaq -10.5%. The S&P 500 is now below 3600 for the first time since the week before Thanksgiving two years ago. Not even the previous 2022 lows brought us down to that key level. The Nasdaq is now also sub-11K and the Dow is sub-29K.

Obviously, we hope to turn this around in this new month, and so far so good: the Dow is projected to open +350 points, the Nasdaq +75 and the S&P +35 points. Q3 earnings season starts up in about a week and a half, holiday season preparations begin and we don’t get a new Fed meeting until November 1-2. Even though “good news” on the economy — which would include positive earnings results — might work their way toward “bad news” in terms of the Fed’s monetary decision, we can remain hopeful that too much bleakness has been priced into the market, and destined to buoy up.

After today’s open, we’ll get some key Manufacturing and Construction Spending data, for September and August, respectively. The S&P Manufacturing PMI for last month is expected to stay in-line with the previous month’s 51.8, while ISM Manufacturing is projected to come down 80 basis points to 52.0%. These are still comfortably above the 50-line between expansion and contraction. Construction Spending for August is expected to narrow from -0.4% last print to -0.2% for September.

PMI Services from S&P and ISM are expected out Wednesday, the same day as the Automatic Data Processing (ADP - Free Report) private sector payroll report. This, of course, will precede the non-farm payroll report due out Friday morning from the U.S. Bureau of Labor Statistics (BLS). Aside from Consumer Price Index (CPI), which doesn’t come out until a week from Thursday, these jobs numbers will be among the most compelling, at least to prognosticators of the next Fed meeting a month from now.

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