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 5 percent.

What happened to gloomy September?

Advertisement

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 any missile strike isn’t happening soon.

“We’re no longer looking at the worst-case scenario,” said Burt White, chief investment officer with LPL Financial.

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.

Investors had been dumping bonds most of the summer, Kinahan said, as investors prepared for the Fed to quickly wind down a bond-purchase program that had kept interest rates low for so long. 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.

Advertisement

Nearly every major debt investment in the U.S. is pegged to the 10-year note, from rates on corporate loans and home mortgages to student loans.

But after the 10-year note struck that psychologically important 3 percent mark, the selloff of the notes slowed, along with the rise of the yield.

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.

 


Only subscribers are eligible to post comments. Please subscribe or login first for digital access. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.