- Alibaba jumps on AI band wagon, global stocks get a lift
- Strong September could fuel gains for stocks in Q4
- Oil prices get boost from Trump
- Dollar is top performer in G10 FX space, defying rate cut expectations
We are into the last full trading week of September, and there are tentative signs that the seasonal pattern, where stocks tend to fall in September especially the main US indices, will not play out in 2025. So far this month, the S&P 500 is higher by 3%, the Nasdaq is higher by 5%, the Eurostoxx index is higher by 2% and the FTSE 100 is higher by a more modest 0.5%.
The gains are not localized to the blue-chip indices, the Russell 2000 is also higher by 2.9%, and the Russell 3000 is higher by more than 3% since the start of September. This rally encompasses both blue chip and mid-cap stocks, however, there are some stand out performers. This includes gold and silver, along with tech stocks and semiconductors. The Philadelphia gold and silver stock index is higher by 17% so far this month, and the Philadelphia Semiconductor index is higher by more than 11%, beating the main blue-chip indices. There have been some pockets of losers, the Dow Jones Transport index is lower by 1.27%, however these are few and far between.
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There have been increases in a broad array of sectors, including banks and healthcare. The top performing stocks on the S&P 500 so far this month include Warner Brothers Discovery, Micron, Oracle, Paramount and Tesla. Just under half of S&P 500 companies have posted gains so far this month, which could ease fears about concentration risks in the US, however, this means that more than half of S&P 500 companies have posted losses. Some airlines, consumer discretionary companies like Royal Caribbean Cruises and transport services and logistics companies, are all lower month to date. Thus, it has not been a universal rally, with a clear preference for some sectors over others.
A strong September is positive for Q4
A strong stock market performance in September is important for the rest of the year. If stocks tend to avoid seasonal declines in September, then this can signal a strong performance in the fourth quarter. Overall, by avoiding September’s seasonal sell off, US stocks may be able to continue this rally into year end.
On Wednesday, global tech stocks are getting a boost from Alibaba, the Chinese e commerce platform. It announced a $50bn AI spending spree, which has given the Magnificent 7 a boost, and all members are higher on Wednesday. This move could lift the main US indices, after the rally paused on Tuesday. The dollar is higher across the board on Wednesday and US yields are also rising, as Donald Trump gave the oil price a boost.
Oil gets a boost from Trump
Threats of more sanctions on Russian oil have triggered a rise in both WTI and Brent crude oil today, Brent is higher by 1.4% and is above $68.50. Official data is expected to show that crude oil inventories fell in the US last week. This is fueling supply fears, especially after Donald Trump said that Europe and other countries need to cut their energy purchases from Moscow.
Russia is also planning to cut diesel exports after a spate of Ukrainian attacks on refineries. A change could be happening in the oil market. After a summer where the oil price has lagged gains in other asset classes, supply concerns could materialize once more. For most of 2025, the focus has been on weak demand, if supply concerns take over the oil price narrative, then we could see a break back above $70 per barrel for Brent.
The rise in the oil price is boosting US Treasury yields, although gains in Europe are lower. We predicted that European bonds could see price gains, and a decline in yields today due to President Trump‘s tough talk on Russia and his calls for Europe to shoot down any Russian aircraft that violates European air space. There is no way that Europe would do this without the backstop of the US supporting Nato. Thus, Europe’s bond market may be pricing in hopes that defense spending can be moderated, if the US continues to support Nato.
The dollar is also higher across the board today and is close to testing a cluster of moving averages. A break above 98.05 in the dollar index would be a short-term positive for the dollar, and it would suggest that the dollar has further to go. The greenback is the top performer so far this week, and the rise in Treasury yields could see further gains.
As we move through this week, stocks may steal the show, as the ferocious gains in AI names fuel a powerful rally that is fending off September’s seasonal weakness.
Chart 1: The S&P 500, The Nasdaq 100, the Russel 2000, The Philadelphia Semiconductor Index and the Philadelphia Gold and Silver index.
Source: XTB and Bloomberg
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