Markets suffered a decline over the month following rising uncertainty over the likelihood of a Fed rate hike. Additionally, lack of clarity over which direction the Bank of Japan could take on monetary policy also dampened investor sentiment. Oil prices suffered another volatile month until OPEC reached a landmark preliminary agreement. Domestic economic data remained mixed if not disappointing in nature.

September’s Performance

For the month, the Dow and S&P 500 fell 0.8% and 0.1% respectively, as uncertainty prevailed over latest monetary policy statements from the Fed and Bank of Japan (BOJ).

Investors maintained a cautious approach during the first three weeks of this month and awaited any changes in policy from the two central banks. However, the Nasdaq rose 1.7% in September on the back of Apple Inc.’s (AAPL - Analyst Report) strong iPhone 7 performance.

Mixed Domestic Data

Economic reports released during the month were mixed in nature if not disappointing. Both the ISM manufacturing and services indexes for the month of August declined. Construction spending remained flat over the month. Retail declined 0.3% in August. Industrial production fell 0.4% in August, reversing July’s increase. The Leading Indicators Index decreased 0.2% in September. Orders for durable goods in the U.S. were little changed in August.

Among the few positive indicators, the Consumer Confidence Index increased to its highest level since Aug 2007, which marked the beginning of the financial crisis leading to a severe recession in 2007-09. The “third” estimate for second quarter GDP came in at 1.4%, higher than the second estimate of 1.1%.

The reading also exceeded expectations of a 1.3% increase. Contrary to the earlier estimate of a slump, business inventories have improved over the second quarter. Nonresidential fixed investment increased by 1% rather than falling 0.9% as was estimated earlier.

Housing Sector Stumbles

Housing traversed a difficult month with signs of a slack in growth becoming more and more evident. Housing starts fell 5.8% in August. Moreover, building permits went down 0.4% from July. However, the NAHB/Wells Fargo Housing Market Index touched its highest level in highest since Oct 2005.

New home sales dropped 7.6% in August, but were up 20.6% from year ago levels. July’s sales were also revised up 5,000 units to 659,000, the highest level since Oct 2007.Sales of existing homes fell 0.9% in August from July. Pending home sales also declined by 2.4% in August, hitting a seven month low.

Job Additions Dip, Hourly Earnings Rise

The U.S. economy created a total of 151,000 jobs in August, considerably lower than the consensus estimate of 179,000. It was also significantly lower than July’s revised job number of 275,000.

The unemployment rate in August of 4.9% was higher than the consensus estimate of 4.8% and in line with July’s rate. The average hourly earnings gained 0.1% or only 3 cents in August from July to $25.73 per hour. It was also lower than the consensus estimate of 0.2% and July’s 0.3% increase.

OPEC Deal Reached

Oil prices endured a high degree of volatility over the month. Price movement was determined by the nature of inventory and production data. The possibility of an agreement on production controls between major exporting countries also dictated price changes.

Ultimately, on Sep 28, members of the OPEC agreed to curtail crude output after a six-hour gathering in the Algerian capital. OPEC officials decided to form a committee to determine how much of production each country would have to cut. The report on the same will be presented in the group’s next meeting, to be held in November.

Iran’s commitment to boost production was a major hindrance, especially, when Saudi Arabia refused to sign any production curbs unless Iran does so. Nevertheless, an exceptional decision was made, with the group proposing to cut its collective output to between 32.5 million barrels per day (bpd) and 33 million bpd, down from August’s figure of 33.2 million bpd.

Financial Stocks Decline

The financial sector experienced a particularly tough month. The lack of a rate hike call and several negative developments related to major banks weighed on the sector’s stocks. The Financial Select Sector SPDR (XLF - ETF report) and the Financial Services Select Sector SPDR (XLFS - ETF report) declined by 3.1% and 2.9% over last month.

Shares of Wells Fargo & Company (WFC - Analyst Report) took a hit after the Consumer Financial Protection Bureau (CFPB) fined the bank for opening millions of unauthorized accounts. In addition to the $190 million fine, the bank might also face a series of legal actions from its ex-employees and shareholders.

Meanwhile, concerns over the stability of Germany’s biggest bank Deutsche Bank AG (DB - Analyst Report) sent its U.S listed shares to an all-time low, which eventually weighed on the financial sector. Shares of Deutsche Bank tanked 6.7% on Sep 29 after a handful of hedge funds that clear derivatives through the bank withdrew excess cash and positions, according to a Bloomberg report.

Apple Experiences Record Rally

The release of iPhone 7 injected new life into tech giant Apple, making it one of the best performers over the past few days. Shares of Apple rallied 11% over four sessions from Sep 12-15, registering its highest four-day gain since Apr 29, 2014.

Moreover, a 3.4% jump in shares of the tech behemoth on Sep 15 led it to finish at $115.56, the highest level since Dec 2015. Strong demand for Apple’s newly released iPhone 7 Plus and iPhone 7 played a major role in boosting shares of the tech behemoth over these sessions.

BoJ Seeks to Control Yield Curve

Dispelling speculation of further monetary stimulus, the Bank of Japan (BoJ) held the key rate steady in its Sep 21 meeting. Instead, the BoJ announced that it will now attempt to control the bond yield-curve. It will issue a zero interest-rate target for 10-year government bonds to counter deflationary threats and accordingly buy bonds.

The BOJ also indicated that its goal for increasing the monetary base via asset buyback, set at 80 trillion yen annually, may now vary in the short term. The bank in fact intends to “expand the [monetary] base until growth in the consumer price index (CPI) excluding fresh food "overshoots" its 2 percent target.”

Fed Keeps Rate Unchanged

The Fed decided to keep key interest rates unchanged at the end of its two-day policy meeting on Sep 21. In its policy statement the FOMC said that the argument for a rate hike “has strengthened,” but the central bank waited for “further evidence of continued progress” before raising rates.

However, rate hike expectations for December increased. Moreover, Fed Chairwoman Janet Yellen’s comments fueled December rate hike chances even more. Yellen said "conditions in the labor market have strengthened” and although “inflation remains low” it is expected to reach the “2 percent objective over time."

She added that she expects a rate hike in 2016 if the labor market continues to progress and “there are no major risks that develop.” Her statements also indicated that the majority of the policymakers are rooting for a December rate increase.

5 Star Performers for September

Here are the top 5 stocks:

Ultra Petroleum Corp. (UPLMQ - Analyst Report) is an independent oil and gas exploration and production company.

Price gain over the last 4 weeks = 25.9%

Ultra Petroleum has a Zacks Rank #1 (Strong Buy) and its expected earnings growth for the current year is more than 100%. The stock’s forward price-to-earnings ratio (P/E) for the current financial year (F1) is 6.51x.

Argan, Inc. (AGX - Snapshot Report) , via its subsidiaries, offers a wide range of services to renewable energy and power generation companies.

Price gain over the last 4 weeks = 23.3%
Expected earnings growth for current year = 51%

Argan holds a Zacks Rank #1 and it has a P/E (F1) of 16.19x.

Jernigan Capital, Inc. (JCAP - Snapshot Report) is a real estate finance investment trust which invests in and owns self-storage properties in the U.S.

Price gain over the last 4 weeks = 19.1%

Jernigan Capital has a P/E (F1) of 9.20x and its expected earnings growth for the current year is more than 100%. The stock has a Zacks Rank #1.

Yirendai Ltd. (YRD - Snapshot Report) is based in China and is involved in the online consumer finance business.

Price gain over the last 4 weeks = 16.1%

Yirendai holds a Zacks Rank #1 and its expected earnings growth for the current year is more than 100%. The stock has a P/E (F1) of 13.53x.

Manhattan Bridge Capital, Inc. (LOAN - Snapshot Report) invests in and manages mortgage loans and related securities.

Price gain over the last 4 weeks = 15.6%
Expected earnings growth for current year = 30.3%

Manhattan Bridge Capital holds a Zacks Rank #2 (Buy) and it has a P/E (F1) of 16.67x.

Can Stocks Recover in October?

Stocks have undergone difficult times this month due to uncertainty over the actions of the Fed. Ultimately, a sense of calm has returned toward the end of the month after the central bank refrained from raising rates. Meanwhile, members of OPEC reached a landmark agreement, which is likely to reduce the volatility in oil prices.

However, investors are likely to remain worried over the next few months. This is because chances of a rate hike in December have increased substantially. Economic data possibly holds the key now and is likely to determine the movement of stocks in the days ahead.