S&P 500 Looks Fine Going Into October. Is The Number Underneath A Warning?

What Happened

S&P 500 Leaves Its Worst Month Behind

Barchart data shows September is the only month with a negative average return for the SPDR S&P 500 ETF (SPY) since 2010. The fund has lost 0.48% in an average September.

October, in contrast, ranks as the third-best month. SPY has averaged a 2.27% gain, behind only November at 3.09% and July at 2.79%.

Market Context

October now begins with one of the strongest seasonal records of the year. However, market breadth has dropped to its lowest level since May 2025.

Meanwhile, the gains came from a few pockets. Micron, Apple, and Dell rose in technology, extending the market’s reliance on AI hardware. GE Vernova and Eli Lilly also posted gains.

A broad recovery would likely require more stocks to reclaim their 200-day averages. Without that, the index may keep relying on a small group of large caps.

Why It Matters

September’s record is more mixed than its reputation suggests. SPY rose in 10 of the last 17 Septembers, including a 0.26% gain this year. A few sharp drops, such as 9.24% in 2022 and 6.94% in 2011, pulled the average lower.

S&P 500 Breadth Hits Its Weakest Level Since May 2025

What October Could Bring

Details

Historically, October has often rebounded after a weak September. In 2011, a 6.94% September loss gave way to a 10.91% October rally. Similar recoveries followed in 2021 and 2022.

Still, the pattern offers no guarantee. Three of the last six Octobers ended lower, in 2020, 2023, and 2024. SPY enters the month up 13.37% for the year.

75% of S&P 500 Stocks Fell in September

The index’s small gain masked weakness across most of its members. FactSet data, visualized by Deena Zaidi, shows about 75% of S&P 500 stocks closed September lower.

Losses reached every sector as Treasury yields climbed during the month. Banks formed one of the largest red blocks, with JPMorgan, Bank of America, and Wells Fargo all declining. Software names, including Salesforce, Adobe, and Oracle, also fell.

As a result, a narrow group of large companies kept the index afloat while most stocks retreated.

The 200-day moving average measures a stock’s long-term trend. Only 40.55% of S&P 500 stocks now trade above it, meaning nearly 60% sit below.

The reading fell 2.59 points on Sept. 30 alone. It peaked near 73% in August, so breadth has dropped about 32 points in roughly six weeks.

The indicator now sits below its April 2026 low of about 42%. Notably, that earlier trough came before a rally that lifted breadth to its August high.

Seasonality favors the S&P 500 in October. However, the index enters the month with its weakest participation in more than a year.

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