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Stock market news: September 30, 2019

Stocks ended higher Monday as investors continued to eye U.S.-China trade developments.

The S&P 500 eked out advances for both the month of September and the third quarter of 2019. The large-cap index advanced nearly 19% for the first three quarters of 2019, posting its best first three-quarter start to the year since 1997.

Here were the main moves in the market by the end of regular trading:

  • S&P 500 (^GSPC): +0.55%, or 16.36 points

  • Dow (^DJI): +0.52%, or 138.60 points

  • Nasdaq (^IXIC): +0.76%, or 60.04 points

  • U.S. crude oil prices (CL=F): -3.3% to $54.07 per barrel

  • 10-year Treasury yield (^TNX): +0.5 bps to 1.678%

  • Gold (GC=F): -1.79% to $1,479.50 per ounce

Stocks on Monday reversed last week’s losses amid signs of another salvo in the U.S.-China trade war. Bloomberg reported that the Trump administration was considering limiting U.S. investment into China by delisting Chinese companies from U.S. stock exchanges and curbing Americans’ exposure to Chinese assets in government pensions funds.

However, the U.S. Treasury Department has since partially refuted the report, writing in a statement that the “administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.” The response, however, did not address other means of limiting U.S. portfolio flows to China.

Shares of Chinese firms listed on U.S. stock exchanges including Alibaba (BABA) and Baidu (BIDU) held onto gains from early trading as concerns over their delisting were put to rest.

High-level talks between the U.S. and China are set to take place in Washington, D.C., in mid-October. Data on the Chinese economy has remained choppy in the weeks since the last mid-level talks between the two sides in September, with these reports reflecting the impact of the trade war with the U.S. on the world’s second largest economy.

A new print overnight showed an unexpected increase in activity for China’s key manufacturing sector, with domestic consumption helping to offset weakness in foreign demand.

The private Caixin/Markit’s manufacturing purchasing managers’ index (PMI) rose to a reading of 51.4 in September from 50.4 in August, holding above the neutral level of 50 to indicate expansion for a second consecutive month. September’s reading marked the fastest pace of increase since February 2018 for the country’s PMI.

But beneath the headline print, results were more mixed. China’s new orders subindex climbed at the fastest pace since March 2018, while new export orders declined for a fourth consecutive month.

“The recovery in China’s manufacturing industry in September benefited mainly from the potential growth of domestic demand,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said in a statement. “The trade conflicts between China and the U.S. had a notable impact on exports, production costs and confidence of enterprises.”

Meanwhile, China’s government-issued manufacturing PMI rose to 49.8 in September from 49.5 in August, the National Bureau of Statistics said Monday, beating consensus economist expectations. This represented the fifth consecutive month of contraction in manufacturing activity by the NBS’s measure. Mirroring the results of the Caixin/Markit survey, output and new orders gauges rose, while new export orders remained in contractionary territory.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., September 18, 2019. REUTERS/Brendan McDermid
Traders work on the floor at the New York Stock Exchange (NYSE) in New York. REUTERS/Brendan McDermid

That’s a wrap

Monday marks the final session of both September and the third quarter of the calendar year. The S&P 500 ended the month about 1.7% higher, and the quarter up by 1.2%. The Dow ended 1.9% and 1.2% higher for the month and quarter, respectively. The Nasdaq rose 0.5% for September, but was down by about 0.1% for the quarter.

Both the S&P 500 and Dow posted their best three-quarter starts to the year since 1997, while the Nasdaq posted its best three-quarter start since 2013.

The third quarter has seen a flurry of developments relating in trade, monetary policy and politics. Both the U.S. and China added tariffs on one another’s goods, before later easing some of these tensions. The Federal Reserve cut rates for a second time this year, and the European Central Bank cut rates for the first time in three years, solidifying a global dovish monetary policy tilt. Attacks on the heart of Saudi Arabia’s oil infrastructure sent crude oil prices reeling, and ramped up the specter of further conflict in the Middle East. And House Democrats opened an impeachment inquiry of President Donald Trump.

These events have stirred up churning equity market volatility, an inversion of a key portion of the yield curve for the first time in more than a decade and steep fluctuations in crude oil prices.

Amid the bevy of events and rising uncertainty over the outlook, September was marked with a notable shift from growth stocks to their value counterparts, or stocks that appear undervalued when looking at measures including price-to-earnings ratios.

S&P 500 value stocks’ month-to-date performance through Friday’s close clocked in at 3.3%, versus an only 0.6% gain in the S&P 500’s growth stocks, according to an analysis by DataTrek co-founder Nicholas Colas.

This was primarily driven on the value side by the performance of large cap Financials – a sector which comprises 22% of value stocks and rose 4.3% for the month-to-date – and Energy, a sector comprising 7% of value stocks and rising 3.7% over the period.

On the growth side, the Technology sector, which comprises 26% of growth stocks, underperformed and rose just 0.2% for the month. And the Health Care sector, accounting for 16% of growth stocks, fell 1.4% for the period, Colas said.

“Value’s gains in September versus Growth were more about sectors than ‘style,’” Colas said in a note Monday. “Financials got a boost from higher long-term interest rates. Energy caught a bid from the Saudi oilfield attacks. Political/regulatory issues, as much as anything else, hurt Health Care and Technology.”

Portfolio flows from major asset managers has also underscored the month-long rotation into value from growth and momentum stocks. In a note to clients Sunday, Deutsche Bank strategist Parag Thatte wrote that momentum funds saw a second straight week of outflows last week, while low volatility funds saw inflows continue. And while value funds did see some outflows last week, they were dwarfed by outflows seen again in growth funds.

“In other signs of waning risk appetite in flows, small (-$5bn) and mid-cap funds (-$4.3bn) as well as Growth (-$6.1bn) and Value (-$2.0bn) saw heavy outflows, largely reversing last week’s inflows,” Thatte wrote. “Low vol ($0.4bn) saw steady inflows continue, but Momentum funds (-$0.4bn) saw a 2nd week of outflows. Gold funds ($2.8bn) saw inflows surge back after a couple of lean weeks.”

Mark your calendars!
Mark your calendars!

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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