Markets Brace for Historically Rocky September

Historically, September has been the worst month of the year for stock investors. In fact, the Dow Jones Industrial Average (since 1897), the S&P 500 (since 1928), and the NASDAQ (since 1971) have each lost an average of roughly 1% in September – the only month of the year with average losses for all three major stock indices. And stocks face a number of hurdles in order to buck that trend in 2025. For starters, newly implemented tariffs could be voided by the Supreme Court, pushing the President to look for a Plan B in his efforts to address trade imbalances. Also, weak job numbers suggest the economy is slowing and in need of lower interest rates. Add the Federal Reserve’s mid-September meeting and subsequent interest rate announcement, and increased volatility would come as no surprise.

The holiday-shortened trading week brought just that. Stocks moved lower to start the week after a federal appeals court ruled most of the President’s tariffs are illegal. Should that ruling stand, the government may need to refund tens of billions of dollars that have already been paid. Without that revenue, the country’s fiscal situation weakens. And that possible weakness pushed bond yields higher and stock prices lower, with the Dow dropping more than 250 points Tuesday.

Google parent Alphabet drove the tech-heavy NASDAQ higher on Wednesday, when a judge determined that Google could keep its Chrome browser. Back in August 2024, another judge had ruled that Google had an illegal monopoly on the search market, and one looming possible remedy for this was forcing Google to offload Chrome. The new ruling was not only a win for Google, but also for Apple which preloads Google search on its phones. Google shares jumped 9% on the news, while Apple bounced 4% and the NASDAQ climbed 1%.

The S&P 500 joined the rally Thursday, charging to a new record high. Payroll provider ADP released a report on private payrolls that at first glance looked a bit weak. However, the soft numbers were seen as one of the final data points needed by the Federal Reserve to justify cutting interest rates at its September meeting. The need for a rate cut was seemingly confirmed Friday with the release of a weaker-than-expected August nonfarm payrolls report. Overall, a choppy week left benchmarks mixed, with the S&P 500 and the NASDAQ delivering gains and the Dow Jones Industrials posting a small loss.

This week brings the final inflation readings before the Fed meeting on September 16-17. We’ll also get updated unemployment claims and a fresh look at consumer sentiment. Any surprise readings could make for another choppy week.