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The Stock Market's August Dip

Written By Brian Hicks

Posted September 3, 2013

The stock market was an emotional roller coaster in August, starting high and ending low – and making many people very happy and then very sad. Let’s review what’s happened in August and what we can expect for September.

stock exchangeOn August 2nd, word that the unemployment rate was lower than it had been in four years made the S&P 500 index jump to 1,709.67. This was a great start to the new month, and everyone was thinking that maybe…just maybe… this wouldn’t be as bad of a month as many people were predicting.

Unfortunately, optimism was quickly replaced with pessimism. Bond yields shot up, which sent mortgage rates up as well. Investors started eyeing the Federal Reserve, wondering and waiting to hear if it would start tapering its $85 billion bond-buying program.

But just as everyone began getting used to the idea of potential tapering in September, a crisis in Syria broke out. The potential for military action set the stock market off again, and down it went.

That was compounded with the news that consumer spending didn’t increase as much as anticipated, with a rise of only 0.1 percent. Income for Americans didn’t budge much either, also with a 0.1 percent rise. Along with it all, new home sales and manufactured goods declined in July and didn’t improve in August.

This all led to U.S. stock indexes closing down almost 2 percent. The Dow lost 4.5 percent since August 2nd, the Standard & Poor’s decreased 2.9 percent, and the Nasdaq 100 went down 0.3 percent.

On Friday, August 30th, the stock market closed with:

  • Dow -30.64 at 14,810.31

  • Nasdaq -30.435 at 3,589.87

  • S&P -5.2 at 1,632.97

Seventy percent of the New York Stock Exchange stocks traded lower, and 73 percent of Nasdaq shares closed in the negatives.

But August is over now. There’s nothing you can do about your investments over the last month. All you can do is look ahead to a September full of speculations.

Piper Jaffray’s technical market strategist, Craig Johnson, told the Washington Post he thinks trading in September will continue to be turbulent. He believes there are too many events going on that will make investors nervous.

It doesn’t help that September has historically been one of the worst months for investors. Actually, the S&P 500 index has decreased in September roughly 60 percent of the time since 1945. It’s lost an average of 0.6 percent since then, and no one will be surprised if this September doesn’t contribute to that loss.

Let’s start with the Federal Reserve. The Fed is trying to decide if it should fool around with the interest rates to help stabilize the economy. With the unemployment rate up, this tempts the Fed to increase interest rates by pulling some money. However, as consumer spending stalls and new home sales decrease, the Fed may want to wait longer to up interest rates. It may even reduce them a little to get people to spend and borrow a bit more. It’s all about trying to balance between inflation and recession.

Since both inflation and recession affect stock markets, it’s important that you keep your eyes on the triggers that influence the economy. When there are fluctuations in the economy, there are changes in how well businesses do, which affects stock market prices.

Moving on from the Fed, keep your eyes and ears open about the Syria crisis. It’s already sent stock markets down, and military intervention could send them lower.

Investing in September Stock Markets

Not all stocks performed poorly in August, as Reuters notes. Inc. (NYSE: CRM) went up 12.6 percent, ending up at $49.13. Apache Corp (NYSE: APA) rose nine percent to reach $85.68 after selling 33 percent of its stake in Egypt oil and gas to Sinopec Group in China. Both of these stocks may continue to do well as they move into September.

Apple (NASDAQ: AAPL) will be announcing its new iPhones on September 10, which may have a huge effect on its stock. So there are some U.S. stocks you can delve into this month. However, you may also want to set your sights overseas.

On Monday, Europe and China released economic reports that helped boost stocks. Europe reported the start of a recovery from its recession due to an increase in manufacturing output. China reports it’s experienced growth in the manufacturing sector as well.

Germany also reported improvements. It is seeing an increase in exportation, which is fostering demand and bumping manufacturing to its highest level in more than two years.

Here’s a recap of the first positive stocks of September, as reported by CNNMoney:

  • London’s FSTE 100: +1.6%

  • Germany’s DAX : +1.7%

  • France’s CAC: +1.7%

  • Hong Kong’s Hang Seng: +2%

Step into September, buckle yourself in, and get ready for the ride. There’s a lot coming for the new month, and we will keep you updated every step of the way.


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