Is Another October Surprise Developing for US Stocks?

On the opening day of trading for the fourth quarter, stocks were beaten down, with all of the major US averages losing more than one percent on the day.

Following Monday's end-of-quarter window dressing session, the losses on Tuesday were unexpected, but not to any extreme extent.

Could the indices be entering an October surprise, not dissimilar to that which occurred in 2018, when the stock markets retreated en masse from all-time highs and then took further flight in December?

It's a real possibility, since, despite making new all-time highs during the summer months, stocks have been relatively flat for the past year. On October 1, 2018, the Dow stood at 26,447.05, which is just 126 points shy of where it closed on Tuesday. Economic conditions haven't really improved. In fact, many might posit that they have degraded.

The World Trade Organization (WTO), which in April 2018 projected global growth at four percent, recently downgraded all of 2019's growth to a paltry 1.2%. Employment, at least in the US, has peaked, with average monthly non-farm payroll data down from last year and September's figures are likely to come in soft.

ISM Manufacturing in the US fell to its lowest level in a decade, registering a 47.8, down from 49.1 points in August and the lowest level since June 2009. Two straight months below 50 indicates not only contraction, but an acceleration in the level of decline. That, in addition to the inverted yield curve, suggests that a recession is due in the US, as Europe is on the brink of recession as well and the condition has a tendency for global contagion.

Thus, stocks get sold, bonds - in a flight to relative safety - get bought and the result is depressed moods all around.

If general chaos is what one desires, this would seem like the perfect opportunity to impeach a sitting president on little more than hearsay. And that is precisely what House Democrats are attempting.

At the Close, Tuesday, October 1, 2019:
Dow Jones Industrial Average: 26,573.04, -343.79 (-1.28%)
NASDAQ: 7,908.68, -90.65 (-1.13%)
S&P 500: 2,940.25, -36.49 (-1.23%)
NYSE Composite: 12,835.35, -169.39 (-1.30%)