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Wall Street braces for volatile month in stocks

Yahoo Finance Live anchors discuss markets bracing for volatility as inflationary pressures continue.

Video Transcript

BRIAN SOZZI: And let's get after it. Here are three things you need to know right now in these markets. First up, it is a-- Wall Street is bracing for a turbulent stretch for this month for the markets. This week, we'll hear more from-- Fed speak from Jerome Powell ahead of the FOMC meeting on the 21st.

This as a new note from JP Morgan says it expects Fed concerns to balance out this month as inflationary pressures continue to ease. So always an interesting time for Wall Street. They're getting back to their mindset, what events are coming up, what stocks do they like, what don't they like. Good note by the folks over at JP Morgan suggesting that we-- the weakness we saw last week to kick off September might continue a little bit here in the near term.

JULIE HYMAN: Yeah. And you know, that doesn't seem to be out of the norm from what we're hearing from other folks. Mike Wilson, who always comes out with a note over the weekend--

BRIAN SOZZI: Big Bear.

JULIE HYMAN: --Big Bear over at Morgan Stanley, he is, of course, reminding folks of his bearishness, though he expects stocks to fall to as low as 3,400 on the S&P 500. But now he's talking about being more pessimistic on the outlook for earnings specifically as we go into the latter part of the year. So people are sort of sourcing their bearishness, if you will, from a lot of different areas, whether it's inflation they're looking at, anemic economic growth, the jobs report notwithstanding, or the effect all of this is going to have on earnings.

BRIAN SOZZI: Yeah, there's still this sense, Julie, that earnings estimates have not come down enough on the Street. But what has come down, just at least according to this JP Morgan note-- it's sentiment on Wall Street. Investors are just bearish on stocks. Now, JP Morgan is making the point.

That might be a good contrarian indicator. But still, JP Morgan has been one of the more bullish outfits on stocks in recent months, despite the weakness. Look like they're overweight, the UK, which is an interesting call right now given everything going on in the UK. And also, overweight the eurozone, which I also find surprising given everything we've been hearing from there too.

JULIE HYMAN: Yeah, definitely. And we're going to get into that in just a second, but I just wanted to also bring us the sort of background for all of this commentary going into September. September is a lousy month for stocks on average. Jeff Hirsch over at the Stock Trader's Almanac highlighting that September the worst performing month of the year since 1950.

And this is whatever average you look at-- the Dow, the S&P, the NASDAQ, the Russell 2000, the Russell 1000-- whichever one you pick. He also looked at midterm years specifically. Of course, we are in a midterm year. He says overall the ranking within the months of the year gets a little bit better in midterm years, but average losses widen, in particular for the Dow and for the NASDAQ. So September is bad. Midterm Septembers are still not great, I think is the takeaway here.

So that's kind of the back [INAUDIBLE].

BRIAN SOZZI: You know what's good about September? You're back, Julie.

JULIE HYMAN: That is-- sure.

BRIAN SOZZI: You're back, and that just-- you know what? That makes me super, super happy.

JULIE HYMAN: Well, I'm glad that makes you, Soz.

BRIAN SOZZI: It does.