September hazards for stocks: Trade, rates, jobs report

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Stocks are near record highs as Wall Street grows more optimistic about trade tensions easing, but investors should watch out because September is historically the worst month of the year for stocks.

Since 1950 the benchmark index has fallen an average of 0.5 percent in September, according to LPL Financial. June and August are the only other months where the index slips, on average.

The U.S. and Mexico announced a preliminary trade agreement this week to replace the North American Free Trade Agreement, and they're in talks with Canada about joining the new pact. Meanwhile the U.S. and China just held their first direct trade talks in two months. Stocks have risen in recent weeks as investors saw signs of progress, but new tariffs or tensions could make Wall Street jittery.

Second-quarter earnings are done and midterm elections are also drawing closer. That could also add more uncertainty, something investors don't like to see.

Analysts say the Trump administration will probably push to resolve the trade disputes before the elections. Wall Street has reacted positively to the Trump administration's cuts in corporate taxes and regulations, and its ability to pursue those policies could shift if Democrats gain more power in the House and Senate.

On Sept. 7 the Labor Department will release its jobs report for the month of August. That includes statistics on hourly wage growth, an important indicator of inflation. A week later the Commerce Department will issue its estimates for retail sales.

Late in the month the Federal Reserve will meet again, and it's almost universally expected the central bank will raise interest rates again.

Investors are betting that there is a 96 percent likelihood that interest rates will go up in September, according to CME Group's FedWatch Tool, and a 62 percent chance that rates will rise again in December. If so, that would match the Fed's projections of four interest rates increases this year.