US market seeing cracks ahead of worst month for stocks

The S&P 500 fell 0.7 percent last week, its second consecutive weekly decline.

A Reuters report last week suggested that things are not likely to get better soon.

“September ranks as the worst month for stocks, according to the Stock Trader's Almanac, producing an average price return for the S&P 500 of negative 0.5 percent,” the report noted.

The report also said that more stocks have been making new 52-week lows than highs.

“There are some cracks in market breadth,” said Peter Cecchini, chief market strategist at Cantor Fitzgerald.

Also, with the S&P 500 trading at 17.7 times expected earnings, many investors consider it expensive and at risk of a selloff.

“When you're at these valuation levels in a lot of these names, it doesn't take much,” said Stephen Massocca, senior vice president, Wedbush Securities.

However, CNBC reported that stocks still look cheap relative to bonds.

“Now, the triple-B bond yield is trading about 1.5 to 2 percent below that of the earnings yield,” said Jack Ablin, chief investment officer at BMO. “Now I would argue for at least more attractive capital going into equity over bonds.”