With S&P 500 down 4.8 per cent, September counted the worst losses since March 2020
September counted the worst monthly losses since the beginning of the pandemic, with stocks on Wall Street falling broadly yesterday.
The S&P 500 ended the month 4.8 per cent lower, its first monthly drop since January and the biggest since March 2020, when the viral outbreak rattled markets as it wreaked havoc with the global economy.
After climbing steadily for much of the year, the stock market became unsettled in recent weeks with the spread of the more contagious Delta variant of Covid-19, a sudden spike in long-term bond yields and word that the Federal Reserve may start to unwind its support for the economy.
The S&P 500 fell 1.2 per cent on Thursday, after selling accelerated in the final hour of trading. The benchmark index is still up 14.7 per cent for the year.
The S&P 500 fell 51.92 points to 4,307.54, and is now 5.1 per cent below its all-time high set on September 2. The September fall cut into the index’s gains for the third quarter, leaving it only 0.2% higher. That is its smallest quarterly gain since the pandemic first stunned the economy and financial markets.
The Dow Jones Industrial Average fell 546.80 points, or 1.6 per cent, to 33,843.92, while the Nasdaq slid 63.86 points, or 0.4 per cent, to 14,448.58. Small company stocks also lost ground. The Russell 2000 index fell 20.94 points, or 0.9 per cent, to 2,204.37.
Bond yields edged lower. The yield on the 10-year Treasury note, a benchmark for many kinds of loans, fell to 1.50 per cent from 1.54 per cent from late on Wednesday. It was as low as 1.32 per cent just over a week ago.
All the sectors in the S&P 500 ended in the red on Thursday, with technology stocks, banks and and a mix of companies that provide consumer goods and services accounting for much of the pullback. More than 90 per cent of the stocks in the index fell.
Inflation concerns
The broader market stumbled through September as investors tried to get a clearer picture of the economy’s path amid inflation concerns and uncertainty about how Covid-19 will continue to impact industries and consumers.
In recent weeks, economic data has revealed that the highly contagious Delta variant has hampered consumer spending and the job market’s recovery.
The weak signals for economic growth continued on Thursday as the Labour Department reported that unemployment applications rose for the third straight week and were higher than economists anticipated.
The Commerce Department upgraded its estimate of economic growth during the second quarter to 6.7 per cent, which was slightly better than economists expected, but they expect growth to slow to 5.5 per cent during the third quarter.
Inflation concerns that had been weighing on the market earlier in the year returned in September as a wide range of companies issued more warnings about the impact of rising prices on their finances.
Sherwin-Williams and Nike are among the many companies that have warned investors about supply chain problems, higher raw material costs and labour issues.
Investors have also had their eyes on Washington, where Democrats and Republicans in Congress have been wrestling over extending the nation’s debt limit.
US shutdown avoided
On Thursday, a bill to fund the US government through December 3 and avoid a partial federal shutdown cleared Congress. Still, Congress’ dispute over whether to raise the government’s borrowing cap remains unresolved.
Treasury Secretary Janet Yellen has said that if the debt limit is not raised by October 18, the United States probably will face a financial crisis and economic recession.
Several companies made outsized gains and losses following corporate news on Thursday. Virgin Galactic’s stock soared 12.1 per cent after it was cleared to fly again following a Federal Aviation Administration inquiry.
CarMax slumped 12.6 per cent for the biggest drop in the S&P 500 after reporting disappointing fiscal second-quarter profits.
Homebuilders fell broadly following a report showing average long-term mortgage rates climbed this week above 3 per cent for the first time since June.
Mortgage rates tend to track the direction in the 10-year Treasury yield. The average rate for a 30-year mortgage rose to 3.01 per cent, according to mortgage buyer Freddie Mac. The rate averaged 2.88 per cent last week and a year ago.
Higher mortgage rates limit the purchasing power of homebuyers, potentially pricing out some would-be homeowners. LGI Homes fell 5.1 per cent and PulteGroup slid 4.2 per cent.