S&P Set for Rare September Win; Small Caps, Chip Stocks Shine

Bank stocks helped lead the SPX to new record highs

Sep 29, 2017 at 1:28 PM
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Stocks started the week in negative territory, as concerns over a possible nuclear war with North Korea resurfaced. However, a big rally in bank stocks after the release of the White House's tax plan helped boost the stock market mid-week -- and overshadow another failed attempt at an Obamacare repeal. And while the revived Trump trade helped send the S&P 500 Index (SPX) to new highs and the Dow Jones Industrial Average (DJIA) to its longest quarterly win streak in more than two decades, the big story revolved around small caps -- with the Russell 2000 Index (RUT) climbing to its highest perch on record.

2 FAANG Stocks Wrapping Up Rough Septembers

Early week headwinds were also exacerbated by Apple stock. After wrapping up their worst week since April 2016, shares of Apple continued to sell off into Monday's trading -- breaching the key 120-day trendline, and triggering two potentially bearish signals. What's more, the tech giant is comfortably on pace to put another September loss under its belt.

Apple's fellow FAANG stock Facebook is also set to end September in the red. And thanks to a steep drop on Monday following news Facebook CEO Mark Zuckerberg had shelved plans to introduce a new class of shares. Nevertheless, after flirting with its worst week of the year at one point -- which didn't concern analysts -- the stock bounced back, and is now on track to notch a weekly win.

Chip Stocks Shine, Roku Goes Public

Elsewhere in the tech sphere, semiconductor stocks put in an impressive week on the charts, with the VanEck Vectors Semiconductor ETF (SMH) topping out at a record peak on Friday. Nvidia continued to bounce from its 40-day moving average as analysts waxed optimistic -- strengthening the case for this buy signal. Needham, meanwhile, set a price target for Micron that's more than double the stock's current price, after the company unveiled a strong earnings report.

Software name Red Hat also reported upbeat earnings, sparking a wave of price-target hikes and sending the stock to tech-bubble highs, while a partnership with Amazon sent Twilio stock on a wild ride. Streaming entertainment name Roku, meanwhile, soared on its first day of trading -- hitting a high well above its IPO.

Best Stocks for October, 4Q

With the S&P 500 closing out the historically bearish month of September with a rare win, October and the fourth quarter in general have tended to be strong for the stock market. And while bulls may want to avoid paying for premium on this popular robotics fund, it might be a good time to buy calls on these tech ETFs or this casino name right now.

Plus, the airline sector has featured some of the best stocks to own next month, while this Dow stock is also on the list. And with the RUT so hot right now, here's a list of 50 small-cap stocks to buy -- including this regional airline name.

Broadening the time frame, Alexion Pharmaceuticals and Regeneron Pharmaceuticals have been two of the best stocks in the fourth quarter -- not surprising, given the overall outperformance of biotechs during this period. FAANG stock Amazon -- which is pacing for a third straight win, despite a Whole Foods data breach -- could certainly be worth a second look from bullish traders, too.

Worst Stocks for October, 4Q

Not all news is good news for the upcoming bullish period, though, with Cisco Systems joining Chesapeake Energy on the list of worst October stocks on the SPX. Oil name Exxon Mobil, on the other hand, has been the worst Dow stock to own in the fourth quarter over the past 10 years.

Yellen, Jobs Data Could Spark Volatility

Next week, Fed Chair Janet Yellen will once again headline a busy line-up of Federal Reserve speakers. After the head central banker earlier this week suggested the Fed had overstated the strength of the labor market, an onslaught of jobs data will also be in focus. These highly anticipated events could translate into a more volatile-than-usual backdrop -- even though low volatility weeks have become the norm for the SPX -- and options continue to be an ideal way to bet on more upside for stocks or initiate portfolio protection.

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