S&P 500 Falls on Last Day of Weak Third Quarter, Investors React to U.S. Inflation Report
On September 29th, the S&P 500 experienced a decline as investors assessed the implications of a U.S. inflation report for the Federal Reserve’s interest rate policy. With the last day of a lackluster third quarter for stocks, investors were also making adjustments to their portfolios. Additionally, the S&P 500 was on track to record its largest monthly percentage drop of the year.
The report revealed that the personal consumption expenditures (PCE) price index, excluding volatile food and energy components, rose by 3.9% annually for August. This marked the first time in over two years that it fell below 4%. The Federal Reserve closely monitors the PCE price index as part of its 2% inflation target.
Eric Freedman, the chief investment officer at U.S. Bank Asset Management, described the data as a “better than expected but still elevated inflation picture.” Furthermore, he acknowledged the various activities happening across both the stock and bond markets due to the quarter’s end.
On Friday, the Dow Jones Industrial Average fell by 172.50 points or 0.51%, closing at 33,493.84. Similarly, the S&P 500 lost 14.22 points or 0.33%, settling at 4,285.48. Conversely, the Nasdaq Composite recorded a gain of 11.56 points or 0.08%, ending at 13,212.83.
The energy sector experienced the greatest decline among S&P 500 sectors, dropping by 1.9%. Financials also saw a decline, but at a lower rate of 0.7%. Despite these declines, the energy sector remains the biggest-gaining sector for the third quarter.
Freedman attributed the decline in energy and financial sectors to a rebalancing effect. All three major indexes are projected to report their first quarterly declines in 2023.
Last week, the Federal Reserve’s hawkish long-term outlook on interest rates resulted in a climb in benchmark Treasury yields to 16-year highs. Consequently, investors have closely followed Treasury yields.
Investors are paying attention to developments in Washington as well. Hardline Republicans in the U.S. House of Representatives have rejected a bill proposed by their leader. This rejection further increases the likelihood of a partial shutdown of federal agencies starting Sunday.
Additionally, investors have raised concerns about a $16 billion JP Morgan fund that was expected to reset its options positions on Friday. This event is feared to have the potential to introduce market volatility.
Nike, the world’s largest sportswear maker, experienced a positive development as its shares jumped by 7% after exceeding Wall Street estimates for first-quarter profit.
On the New York Stock Exchange, advancing issues slightly outnumbered decliners, with 44 new highs and 91 new lows. The Nasdaq recorded 39 new highs and 135 new lows, with advancing issues also slightly outnumbering decliners.
Lewis Krauskopf in New York, Shashwat Chauhan, and Shristi Achar A in Bengaluru contributed to this report. The article was edited by Arun Koyyur, Maju Samuel, and David Gregorio.