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Market Extra: It was the worst September for stocks since 2002. What that means for October.

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It was a September investors will remember — and not in a good way.

A Friday drop left the S&P 500 and Dow Jones Industrial Average with their biggest monthly losses since March 2020. And it was the worst September performance for both indexes since 2002. Seasonally inclined investors may wonder what that means for October.

Dow Jones Market Data took a look at how equities have done in the wake of particularly brutal Septembers.

But first, how does the month just ended stack up? The S&P 500
SPX,
-1.51%

fell 9.34%, while the Dow
DJIA,
-1.71%

dropped 8.84% and the Nasdaq Composite
COMP,
-0.43%

declined 10.5%. The Nasdaq’s drop marked its worst September performance since 2008.

Deep Dive: These 20 stocks in the S&P 500 tumbled between 20% and 30% in September

Sample size is limited. Not counting the current month, the S&P 500 has seen a September decline of 7% or more 11 times, according to data going back to 1928. The Dow has dropped 7% or more in September 13 times based on data back to 1928. The Nasdaq Composite has suffered a fall of 9% or more in September six times going back to 1986.

See: Stocks and bonds are ‘discounting for a disaster’ after the worst stretch for investors in 20 years

Dow Jones Market Data found that in Octobers that follow a 7% or larger fall in September, the S&P 500 rises 0.53% on average in October and sees a median gain of 1.81%. That’s better than the average for all Octobers at 0.47% and the median at 1.03%. October is positive in years following an outsize September loss 54.55% of the time, versus 57.45% for all Octobers (see table below).

S&P 500

Category

7% or worse

All

Average

0.53%

0.47%

Median

1.81%

1.03%

Worst Performance

-16.94%

-21.76%

Best Performance

16.30%

16.30%

% of October’s higher

54.55%

57.45%

Seasonal patterns, however, are only a guide. As MarketWatch’s Isabel Wang noted in a Friday report, many strategists are skeptical of October’s reputation as “bear killer.” They argued that a macroeconomic environment dominated by central banks aggressively tightening monetary policy in a bid to wring out inflation is likely to overshadow favorable seasonal factors.

October is also associated with historical market crashes, including those in 1987 and 1929. The S&P 500 plunged nearly 17% in October 2008 following a 9.1% fall in September in the wake of the collapse of Lehman Brothers.

Don’t miss: Stock-market bulls hope October will be another ‘bear killer.’ Why skeptics are unconvinced.

Dow Jones Market Data, meanwhile, found that in Octobers following a September drop of 7% or more, the Dow has seen an average fall of 1.51% and a median drop of 1.46%. That compares with an average rise of 0.37% for all Octobers and a median gain of 0.79%. The S&P 500 has risen 46.15% of the time in Octobers that follow a 7% or more September decline, versus a rise 57.6% of the time for all Octobers (see table below).

DJIA

Category

7% or worse

All

Average

-1.51%

0.37%

Median

-1.46%

0.79%

Worst Performance

-20.36%

-23.22%

Best Performance

10.60%

10.65%

% of October’s higher

46.15%

57.60%

And here are the numbers for the Nasdaq in October following a September drop of 9% or more:

Category

9% or worse

All

Average

2.19%

0.73%

Median

4.26%

2.16%

Worst Performance

-17.73%

-27.23%

Best Performance

17.17%

17.17%

% of October’s higher

50.00%

54.90%

Since 1950, September has been the worst performing month of the year for the Dow Jones Industrial Average, S&P 500 and Russell 1000 and the worst for the Nasdaq Composite since 1971 and the small-cap Russell 2000 since 1979, according to the Stock Trader’s Almanac.

Stocks ended sharply lower on Friday after getting off to a choppy start.

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