The recovery has been stalling and it is becoming easier and easier to argue that the next recession (often mislabeled as a double-dip recession) is afoot. Friday’s net-zero in August non-Farm Payrolls and a lower revision to prior employment gains only exacerbates some of the fears out there. There is a myth or theory that certain months are notoriously good or bad for the stock market, and September is actually supposed to be the most negative month of the year. We are taking a look at the historic figures and then looking at the economy and the big DJIA stocks to see if that is going to be the case in 2011.
August was very painful, even if the markets recovered from the lows. The DJIA was down about 4.5% and the S&P 500 fell by almost 5.7%; the tech-heavy NASDAQ fell by 6.4%. The Stock Trader’s Almanac shows that September is more often than not a jinxed month for stocks as traditionally the worst month on the calendar for stocks.
On average since 1950, there is a 0.9% drop in the DJIA. The worst September was in the weak economy of 2002, when the DJIA fell almost 12.5%. The U.S. was about to attack Iraq and was still recovering from the economic turmoil after the terror attacks of the prior year. Oil had gone from under $20 a barrel to nearly $30 and gold had moved up from $280 per ounce to $320 per ounce. The good news, if there is good news… Stock Trader’s Almanac shows that pre-election Septembers are down “only” 0.6%.
The best September for the DJIA is said to be back in 1954, but the September weakness barometer was way off last year in 2010 and it was also off in 2009. Isn’t it October that investors worry about the big market crashes?
However, in pre-election years, such as this one, the Dow industrial average is down only 0.6 percent in the average September. So, what is in store for 2011′s September? The DJIA closed August out at 11,613.53 and the DJIA was under 11,250 on Friday morning after the dismal employment data was released. Does that mean that the bad news is already priced in or does that mean that the pain is only just beginning?
So, what is store for DJIA stocks? Here is a quick hit on some of the key pivots for the DJIA (NYSE: DIA) today looking into the rest of September.
Verizon Communications Inc. (NYSE: VZ) just boosted its dividend this week, a commitment that earnings should remain steady and high for years and years. While the market has grown to expect dividend hikes, we were not as certain that a dividend hike would come. This now puts pressure for AT&T Inc. (NYSE: T) to also hike its dividend later this year even if it does face a multi-billion break-up fee if that DOJ-blocked acquisition of T-Mobile stays a blocked deal.