October is already living up to its volatile reputation

Historical trends heading into October pointed to a choppy month ahead. Tuesday’s session confirmed that. The S & P 500 fell nearly 1% to kick off the new month of trading. The Nasdaq Composite shed more than 1.5%, and the Dow Jones Industrial Average lost 0.4%, or 173 points. Those declines came as tensions in the Middle East escalated after Iran launched ballistic missiles at Israel. Meanwhile, Israeli forces began a ground operation into southern Lebanon. The news sent crude prices spiking, and investors are shoring up protection. West Texas Intermediate futures popped 2% on Tuesday. On Wednesday, oil jumped another 3%. The Cboe Volatility Index , Wall Street’s preferred fear gauge, swelled abpve 20 — its highest level since Sept. 11. The VIX traded above 19 on Wednesday. Scott Rubner, tactical specialist at Goldman Sachs, expects this choppiness to persist over the next few weeks. “I am tactically bearish on U.S. equities over the next 3 weeks. I am bracing for added volatility and the market to over-trade daily headlines and themes,” he said in a note to clients Wednesday. “There is a supply and demand mismatch, and skew is to the downside.” Seasonal pressures are also likely to remain in place. CNBC Pro found that the S & P 500 averages a daily move of 1.3% in either direction in October, based on FactSet data going back to 1950. On top of that, the benchmark index has seen an average October decline of nearly 1% for the entire month during election years, according to the Stock Trader’s Almanac. Bottom line: This may just be the beginning of a topsy-turvy period for the market. Elsewhere on Wall Street this morning , Baird downgraded Milwaukee-based motorcyle maker Harley-Davidson to neutral from buy. “We contacted Harley-Davidson dealers for an update on Q3 trends. Dealers reported weak retail, excess inventory and caustic sentiment – all of which suggest risk to guidance,” Baird wrote.