Is September Living Up to Its Reputation as a Bad Month for Stocks?

U.S. markets started the first full week of September with a slump, as the Dow Jones Industrial Average (DJIA) dropped around 550 points on Tuesday. After a long holiday weekend, investors returned with renewed selling pressure, driven by a trifecta of concerns: rising bond yields, government debt, and persistent inflation fears. This market shudder aligns with September’s historical reputation as a weak month for equities, with the trend holding true at the outset.

Manufacturing Woes and the Shadow of Tariffs

A key factor in the market downturn was the latest U.S. manufacturing data. The Institute for Supply Management’s (ISM) Manufacturing PMI came in at 48.7 for August, marking the sixth consecutive month that the index has remained below the critical 50.0 level, which signifies economic contraction.

While the number was a slight improvement from July, the details painted a bleak picture. Companies are struggling with tumultuous trade policies from the current administration, which has created supply chain instability. ISM survey respondents specifically noted that new tariffs on countries like Brazil and India are dampening new order growth. With inventories that had built up earlier in the year now beginning to run dry, companies are competing for a limited supply of goods while manufacturers hold back on production. The report also pointed to a sharp decline in trucking backlogs, with activity levels now described as worse than during the 2008 financial crisis.

Upcoming Data and Investor Uncertainty
With investors losing confidence in official economic figures due to political pressure on data reporting, upcoming private-sector indicators are taking on heightened importance. The week ahead is packed with critical data releases:

JOLTS Job Openings for July are due on Wednesday.

The ISM Services PMI will be released on Thursday.

The highly anticipated Nonfarm Payrolls (NFP) report is scheduled for Friday.

These reports will be closely watched for fresh signals on labor demand and broader economic health, as traders seek reliable information to navigate the current market uncertainty