Yahoo Finance

With September being a historically weak month for stocks, what can we expect from here? Joining us now on this, we've got Adam Turnquist. He is the chief technical strategist at LPL Financial. Adam, great to speak with you here. So, listen, we're chatting with you on the heels of this softer than anticipated ISM data. To what extent do you think this is a sign of things to come as we head towards that economic data we're all watching, which is that jobs report on Friday here?

Hey, good morning. Thanks for having me. Hopefully we're not getting a flashback of that August fifth week when the markets sold off. We had a weak manufacturing print and then of course that weak non-farm payrolls report, which will obviously come on Friday. But I think where right now the economy is a bit on trial with most of the focus on the labor market, that's going to be the headline event, a drum roll into that Friday morning print and really going to set the tone for the September rate cut, whether that's 25 or 50 basis points. I think if we see anything weaker than expected, expect a 50 basis point rate cut. I don't think the market's going to welcome that news as it did not back in early August. So it's going to be a short, but a pretty wild week, I think here in the markets.

You know, it it's particularly interesting, Adam, especially as we're looking through some of the context of this reading this morning, where they added a note saying demand remains subdued, companies showing an unwillingness right now to invest in capital inventory due to current federal monetary policy and then election uncertainty. And they added in this kind of tender that a lot of companies are saying that their inventory levels are are just right. So that doesn't necessarily support the need for adding on more jobs in the manufacturing sector. So what does that pass through mean for the employment situation as well, from your perspective?

At least the employment index, or a portion of that, did move higher. I think that's a positive sign, but when you look at new orders, a more forward looking indicator, and that continues to contract, not a great sign. And it's interesting to compare where ISM, the the ISM data is right now in contractionary territory, with a market trading near record highs, just a few percentage away from those July highs. That historically does not line up. When you have a market within 3% of a new high, on average that ISM manufacturing data is around 55. So there's an interesting gap between where historically manufacturing is in a strong bull market versus where we're at right now. And again, I think it does suggest maybe we're slowing down. Some of the anecdotes in that survey data are certainly interesting, and it's just more evidence that we're maybe normalizing or slowing down from an economic standpoint.

Adam, prices paid also came in higher than expected and we're seeing some inflationary themes under the hood of this data print here from the ISM side of things. And we've got that CPI print coming up on the 11th. Are you concerned at all about a reignition of inflation moving forward here and is that something that investors listening to this should start to potentially position around?

That's not a key concern right now when we look at the economic data. We're pretty comfortable with the trajectory of inflation and eventually reaching close to the Fed's 2% target. I do think it's really about the labor market now. Inflation's moved more to the back burner as we've seen consi relatively consistent prints that show a deceleration. And with the labor market, there's more volatility as as we've witnessed in some of the data, especially non-farm payrolls, as we witnessed back in August.