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“I am not a person of opinions because I feel the counter arguments too strongly.” – Mary Shelley

Morning stock market summary

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If there’s one topic we can be confident that Mary Shelley wouldn’t be weighing in on if she was around today, it would be the economy. No matter which side you choose, there’s good evidence to support your view. Recession? How can we even entertain the thought with jobless claims and the unemployment rate both still at extremely low levels and the Atlanta Fed GDP Now tracking Q3 growth at 5.9%? OK, but with the yield curve on pace for a record streak of inversion, leading indicators down for more than a year straight, and manufacturing surveys deeply in negative territory, how can you not have a recession in your forecast? There’s merit to both arguments.

It’s a busy day for economic data, and it started off with the ADP Employment report. After a weaker than expected JOLTS report and a Consumer Confidence report which showed softening sentiment towards the labor market yesterday, the ADP report continued that trend coming in at 177K versus forecasts for an increase of 200K and follows four months where the reported number was well over 250K. Besides ADP, there is plenty of other data to contend with this morning including Wholesale Inventories (less bad than expected), revised GDP (down to 2.1% from 2.4%), Personal Consumption (slightly weaker), and Core PCE (2.0% vs 2.2% forecast). The only other report on the calendar today is the Pending Home Sales report (10 AM), which is expected to show a decline of 1%.

With two trading days left in August, it’s impressive to see that after heading into the week going all month without back-to-back positive days in the S&P 500, the S&P is now looking to string together its fourth straight positive day. That’s the good news. The bad news is that we’re heading into one of the toughest parts of the calendar.  As shown in the composite chart of the S&P 500’s tracking ETF (SPY) over the last ten years, September has been the weakest part of the late summer/early fall consolidation period.

Below the chart, we have also included gauges from our Seasonality Tool which show how performance in the week and month after today’s date over the last ten years has compared to all other one week and one-month periods throughout the year. In the week after 8/30’s close, SPY’s median gain of 0.18% ranks in the 44th percentile relative to all other one-week periods. Over the next month, though, the median decline of 1.21% ranks in just the fourth percentile relative to all other rolling one-month periods. Just another reason very few people like to see summer end.

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