The utilities sector could struggle in the holiday-shortened week
Next week is a short trading week, with markets closed on Monday in celebration of Labor Day. The S&P 500 Index (SPX) is up about 9% on the year, which is a good sign for stocks for the rest of the year. The table below shows that over the past 20 years, there were nine occasions when the index was up by 5% or more heading into Labor Day. In those nine years, the rest of the year was positive every time, with an average gain of 7.16%. The other years were positive just 64% of the time, with an average gain of less than 2%. The S&P 500 has been positive eight years in a row from Labor Day through the end of the year. The last year it went lower was in 2008, when it fell 30% in the last three months of the year during the financial crisis.
Next Wednesday Could Be Rough for the S&P
Let’s shorten our time frame and focus on the days before Labor Day. The Friday before the holiday week tends to be a good day for the market, with the S&P 500 gaining an average of 0.08% that day compared to the 0.01% average return of a typical Friday. However, this gain is offset by a worse-than-usual Thursday, which averages a loss and has been positive less than half the time.
The table below focuses on the week of Labor Day, which gets off to a fast start on average. Tuesday, the first day of the week, averages a gain of 0.44%, which is great for an average one-day return. The reason for the high average isn’t due to the consistency of its returns. It was positive 55% of the time, which is just slightly better than a normal Tuesday which was positive 53% of the time. When it has gone up, though, it goes up substantially. The average positive return was over 1.5%.
However, the good times have largely stopped there. The Wednesday of Labor Day week has been negative more times than positive, with a flat average return. While Thursday and Friday have more positive returns than negative returns, they also average a loss. Overall, the average return for the week slightly underperforms other weeks.
The Best And Worst Labor Day Stocks
Finally, below are lists of the 20 best and worst S&P 500 stocks during Labor Day week over the past 10 years. The stocks are sorted first by percent positive, and then by average return. Amazon (AMZN) tops the list of best stocks. Utilities make up a decent share of the stocks on the worst performers table; PPL Corp (PPL) has been negative the past 10 years during the week of Labor Day.
