Wall Street Braces for Pivotal Q4 as September Rally Defies Seasonal Trends

As the markets enter a new week, the euphoria surrounding the recent Federal Reserve rate cut has started to fade, and traders are now turning their attention to the next set of key catalysts. The tech sector could see a boost from a potential lifeline for Intel, while Micron's earnings report and FedEx's shareholder meeting are also on the radar. Meanwhile, a slew of economic data and Fed speeches will provide further insights into the state of the economy and the central bank's policy decisions.

Navigating the Uncharted Waters of a Surprising September Rally

Futures Point to a Cautious Start

U.S. index futures are modestly higher at the start of the week, as traders look to navigate the shifting market landscape. The tech-heavy Nasdaq 100 is leading the charge, with a 0.24% gain, while the S&P 500 and Dow Jones Industrial Average are up 0.15% and 0.06%, respectively. The small-cap Russell 2000 is also showing strength, with a 0.32% increase.In the premarket, the SPDR S&P 500 ETF Trust (SPY) is up 0.15% to $569.09, and the Invesco QQQ ETF (QQQ) has climbed 0.27% to $483.06, according to Benzinga Pro data.

Recapping Last Week's Market Performance

U.S. stocks recorded gains for the second straight week, as the Fed's 50-basis-point rate cut set the market on fire, although the initial reaction was mixed. Positive retail sales data on Tuesday generated buying interest, but sentiment soured on Wednesday despite the initial positive response to the rate cut. Traders reacted with a lag, sending averages sharply higher on Thursday, with the S&P 500 and Dow Jones Industrial Average scaling record highs.Caution returned on Friday, as the market closed the triple-witching session on a mixed note. However, the Dow managed to build on its gains and ended at a new high.

Analysts Weigh In on the Surprising September Rally

The atypical September rally points to more gains ahead before the year ends, according to Carson Group's Chief Market Strategist Ryan Detrick. He noted that a new high for the S&P 500 in September has historically meant an even better fourth quarter, with the market rising 19 out of 21 times and the average gain being nearly 5%. In election years, when the S&P 500 makes a new high in September, the fourth quarter has been higher 100% of the time, with an average gain of 6%.JPMorgan Global Investment Strategist Sarah Stillpass also sees the September rate cut as a positive for equities. She pointed out that five of the 10 best years for the S&P 500 happened when the Fed was cutting rates without a recession since 1980. Stillpass also noted that the Fed has cut rates 12 times when the S&P 500 was within 1% of its all-time high, and the market was higher one year later all 12 times, with a median return of 15%.

Upcoming Economic Data and Corporate Highlights

Traders will be closely watching a slew of economic data in the coming week, including Fed speeches, the core personal consumption expenditure index, weekly jobless claims, flash private sector activity readings, consumer confidence, durable goods orders, and housing market indicators.On the corporate front, Intel's potential $5 billion investment from Apollo Global Management and Micron's earnings report are likely to be in focus. Additionally, FedEx's annual shareholder meeting and conference presentations by various companies will also be on traders' radar.

China Continues to Stimulate its Economy

China followed up with more rate cuts on Monday, as the country continues its efforts to revive its struggling economy. The People's Bank of China announced a reduction in its 14-day reverse repurchase rate, building on the downward adjustments that began in July. Chinese central bank governor Pan Gongsheng is scheduled to hold a press conference on Tuesday to discuss financial support for economic development.

Global Markets Remain Cautious

The Asian markets closed on a lackluster note, with the Japanese market remaining closed for a public holiday. European stocks also showed tentativeness as traders digested weak private sector activity data from the region.In the commodity markets, crude oil and gold futures are modestly higher, with the latter trading near record territory. Bitcoin has surged past the $63.5K level, sending crypto-linked stocks higher on Monday.The 10-year Treasury note yield rose 1.1 points to 3.739%, reflecting the market's cautious sentiment as it navigates the shifting economic landscape.