Stocks fell this morning after opening moderately higher. The Dow, S&P, and Nasdaq Composite all tumbled shortly before noon as nearly every sector got hit by a wave of midday selling. Energy and financials – two of the better performing sectors over the last week – were dragged lower, causing the Dow to plunge over 1%. Tech, meanwhile, traded for a slight loss.
What also fell today were Treasury yields. The 10-year Treasury yield dropped to 1.52%, which may have helped lagging tech shares stay afloat. Several Big Tech names plunged, but overall, the tech sector fared far better than the rest of the market. Semiconductor stocks like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) traded higher.
Today’s losses don’t come as much of a surprise, though. September has historically been a rough month for bulls. This year, that certainly seemed to be the case.
“September lived up to its reputation and dented stock portfolio returns, but not too badly,” explained Ed Yardeni, founder of Yardeni Research.
“There has been a lot of concern that higher wages, higher energy prices, and higher transportation costs will weigh on earnings for the remainder of this year and into 2022. It’s certainly something we’ll be tracking. But so far, analysts remain relatively sanguine.”
It’s also something we’ve been warning of for months; that rising producer costs would eventually hurt sentiment. It all started back in early August when Clorox (NYSE: CLX) reported disastrous earnings due to rising manufacturing and logistics costs. The company went so far as to reduce its 2022 revenue projections.
Other corporations are likely to provide similar reports in the coming weeks. But will it be enough to end the bull market?
Many analysts believe it won’t, and even better, that the worst is now behind us.
“We haven’t had even a 5% pullback since October of last year. It’s going to be a year. This feels a lot worse than it actually is because we haven’t had much volatility since last October, last September,” said Paul Schatz, President of Heritage Capital President.
“But remember, all the reasons why we’re going down — nothing is new. You’ve got the debt ceiling and the government shutdown and Evergrande and inflation. All known things. None of these are going to befall the bull market or cause a recession.”
Schatz continued:
“There’s always some kind of short-term thing the market focuses on to get a pullback going. We’ve got it. I think it’s one you buy with both hands in the next week or so, and I think we’re going strongly to new highs in Q4.”
Every monthly dip over the last year has been filled and then some. Traders who bought these dips were rewarded handsomely time and time again.
Will October provide a repeat performance?
Probably. Let’s not forget that the Fed isn’t tapering just yet. All of the lingering market fears have yet to truly “come to a head.”
And until they do, dip-buying remains a sound strategy, especially with stocks back near their September lows.
