Brian Sozzi and Emily McCormick break down Monday’s Morning Brief, which details how September is living up to its persona of being a historically weak time for the market as stocks continue to slip and the other factors that could continue to affect the market during September.

Video Transcript

- We're a few minutes into today's regular trading day. And we are watching stocks sell off across the board. We're off the sessions of the overnight lows that we saw during the pre-market session.

But should still note that we are seeing each of the S&P 500, Dow, and NASDAQ off by more than 1% as we speak. And that is the topic of our morning brief discussion this morning. And today, we're talking about September's selling pressure.

Now the S&P 500 is pacing toward posting its first monthly decline since January. It was already on track to do so even before today's sell off. And O'Brien, I know you explored this topic in the Morning Brief up on the Yahoo Finance website now.

And we know that September is historically seasonally a weak month already for stocks. But just based on the backdrop that we're heading into here, concerns over the coronavirus, concerns over fiscal and monetary policy. What do you think is really made this September especially tough?

- Right, Emily. I didn't mince any words in the morning Brief newsletter today that I wrote. I mean, September so far has stunk. And it's getting even stink here as we speak. I mean, look at the Dow.

Dow is down over 500 points. The S&P 500, NASDAQ in the red. VIX is popping. So this stinky hot mess is only getting worse for investors here so far on this month.

And a couple of stats I think to just fill this out a little bit as I talk about in the Morning Brief newsletter. On Friday, the S&P 500 slipped below its key 50 day moving average. In a case anybody was wondering out there as I know they were.

It is only about 7% away from hitting its 200 day moving average. What does this all mean? It means that market sentiment is shifting. So that's worth noting.

Next thing worth noting global equities. Global equities. Not just US have fallen for two consecutive weeks. Of course, don't like to see that again. It paints a picture of a stinky September.

And this is the-- I'll remind everyone. This is a Yahoo Finance stat of the day for the first time in 10 months. Fewer than 75% of S&P 500 stocks closed below their 200-day moving averages on Friday. That ended the fourth longest positive streak since at least 1928.

And there are a couple of things here at play, Emily. Of course, as we've gone through September we've seen a lot of companies begin to warn on their corporate earnings. And as a result of that, earnings estimates on the street, that upper momentum that we've seen really for the better part of a year now that is starting to slow down.

And you're seeing analysts start to cut their estimates. And that is a negative for stocks or usually is a negative for stocks. And of course, we have the Fed meeting coming out this week. And everybody will be watching the plot, where they have Fed members put their forecasts for growth and inflation.

There could be concerns. If because we continue to see a good deal of inflation. Do Fed members pull forward their expectations, expectations for rate hikes, of course.

Investors do not want to see any rate hikes and they do not want to see those expectations moved up. And lastly, Emily, as we just talked about with Michael Antonelli at Baird, there's just a lot on the calendar remaining for the month of September. You'll have debt ceiling debates continue, you have a lot of debates in DC regarding the 3 and 1/2 trillion budget package or infrastructure package. That-- those debates will continue on. And there's a lot of wild cards on how those things will pan out.

- Absolutely, Brian. And I think a couple of other stats that I wanted to point out is as we were heading into September, we had LPL Financial talking about the fact that the S&P 500 had been at a record high. 53 times before the end of August. That was a record high topping the previous record that we saw from 1964.

So we did have a lot of momentum heading into this month. Of course, a lot of that has been at least partially reversed based on where we are now. But another thing that Michael Antonelli from our previous segment had been talking about is that even at the levels that we're at now, we're not going to get this 5% correction just yet at least on that S&P 500.

It's been since last October since we saw that here. So it just does seem, Brian, that there has been a lot of good news priced into the market. Perhaps there's a little bit of profit taking here. Perhaps there had been a market price for perfection at this point.

And now having all this these wild cards in this uncertainty is infusing a lot of this volatility. But Brian, one other thing I wanted to ask you is, when do you think based on the analyst you're talking to? When do you think will have made it through these wild cards? Like what is that defining event that investors should perhaps be waiting for it to see if we're going to melt higher or perhaps end at current levels on the S&P 500 for this year?

- Very simple answer. It's the shoulder shrug. And really, I mean, there's no-- I'm not hearing a good case in the folks that I talked to. I'm not hearing a good case among them on buying the dip.

Why would you want to buy the dip? I'm sure stocks may go up for the next 30 years. But at least near-term if you're trading this market, the near term negatives appear to outweigh the near term positives.

I think you're going to have to get past this Fed meeting to really get a little more stability back to these markets, have to know what the Fed is thinking ahead of the next jobs report. Of course, it'd be good if DC, the politicians in DC Get this debt ceiling raised let's get it done and dusted remove that market risk.

- Definitely a lot to be watching just in this week alone.