S&P 500 is flat as stocks struggle for direction in September

The S&P 500 was steady on Wednesday, with the average still flat for the month of September, as investors reassess the economic growth outlook following a smooth ride in the market so far this year.

The Dow Jones Industrial Average rose just 3 points. The S&P 500 traded around the flat line. The Nasdaq Composite fell 0.4% after closing at a record on Tuesday.

Many investors are bracing for volatility in September, one of the seasonally weakest months of the year. Price swings could make a comeback, especially with the S&P 500 up more than 20% this year without a single 5% pullback.

"We see a bumpy September-October as the final stages of a mid-cycle transition play out," Morgan Stanley chief cross-asset strategist Andrew Sheets said in a note. "The next two months carry an outsized risk to growth, policy and the legislative agenda."

One of the catalysts for a sell-off could be the Federal Reserve and the potential for it to pull back an unprecedented monetary stimulus to support the economy throughout the pandemic. Fed Chairman Jerome Powell has indicated that the central bank is likely to begin withdrawing some of its easy-money policies before year-end, though he still sees interest rate hikes in the distance.

Still, the outlook for the liftoff is clouded by the coronavirus variant and the latest jobs report, which showed a big disappointment.

On Wednesday, the Labor Department will release its closely watched Job Openings and Labor Turnover Survey. Meanwhile, the Federal Reserve is set to publish its periodic "Beige Book" survey of activity across its 12 districts.

The S&P 500 fell 0.3% on Tuesday in relatively thin trading following the Labor Day weekend. The blue-chip Dow dropped 260 points, weighed down by 3M and Honeywell, while the tech-heavy Nasdaq Composite rose less than 0.1% to eke out a record close.