Stocks on Wall Street fell widely on Thursday, closing September with the worst monthly loss since the start of the pandemic.
The S&P 500 plunged 4.8% in the month, its first monthly decline since January and its biggest since March 2020, when the viral outbreak rocked markets as it wreaked havoc with the global economy.
After climbing sharply for much of the year, the stock market has been volatile in recent weeks with the spread of the more contagious delta version of COVID-19, a sudden spike in long-term bond yields and word that the Federal Reserve is starting to open up. May its support for the economy.
The S&P 500 fell 1.2% on Thursday after intensifying selling in the last hour of trading. The benchmark index is still up 14.7% for the year.
“It’s not really surprising that we’re seeing a weak September because it’s historically been the worst month on average,” said Jay Pastricelli, CEO of investment firm Zega Financial. “Unfortunately, there isn’t much information to be gained from this for October.”
The S&P 500 fell 51.92 points to 4,307.54, and is now down 5.1% from its all-time high set on Sept. 2. September cut the index’s gains for the third quarter, making it only 0.2% higher. This is its smallest quarterly profit since the pandemic stunned the economy and financial markets for the first time.
The Dow Jones Industrial Average fell 546.80 points, or 1.6%, to end at 33,843.92, while the Nasdaq fell 63.86 points, or 0.4%, to 14,448.58. Shares of smaller companies also declined. The Russell 2000 Index fell 20.94 points, or 0.9%, to 2,204.37.
Bond yields fell. The yield on the benchmark 10-year Treasury note for several types of loans fell to 1.50% from 1.54% late Wednesday. It was as low as 1.32% from a week ago.
All sectors of the S&P 500 ended in the red on Thursday, with a mix of technology stocks, banks and companies that provide consumer goods and services accounting for much of the pullback. Over 90% of the index’s shares fell.
The broader market faltered through September as investors tried to get a clear picture of the economy’s path amid inflation concerns and uncertainty about how COVID-19 will continue to affect industries and consumers. In recent weeks, economic data has shown that the highly contagious delta variant has reduced consumer spending and job market recovery.
Weak signs of economic growth continued on Thursday as the Labor Department reported unemployment applications rose for a third consecutive week and exceeded economists’ estimates. The Commerce Department raised its forecast for economic growth during the second quarter to 6.7%, slightly better than economists expected, but they expect growth to slow to 5.5% during the third quarter.
Inflation concerns, which weighed on the market at the start of the year, eased back 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 several companies that have warned investors about supply chain problems, high raw material costs and labor issues.
Inflation will likely remain a major concern hanging over markets for the rest of the year, Pestricelli said, and could put the Federal Reserve in a difficult position to raise rates earlier than expected.
Investors are still trying to ascertain whether those issues are temporary and part of the economic recovery or could last longer than expected. The upcoming round of corporate earnings reports could shed light on how companies are tackling those problems.
“The jury is still out on this and we don’t really know whether it’s demand-driven or supply-driven inflation,” Pastricelli said. “If you end up getting low growth and high inflation, you get inflation and that’s not good for the market.”
Investors are also eyeing Washington, where Democrats and Republicans in Congress are wrestling to raise the country’s debt limit. On Thursday, Congress approved a bill to fund the US government until December 3rd and avoid a partial federal shutdown. Still, the Congress’s contention for raising the government’s borrowing limit remains unresolved.
Treasury Secretary Janet Yellen has said that if the debt limit is not raised by October 18, the United States will likely face a financial crisis and an economic downturn.
Several companies posted massive gains and losses following the corporate news on Thursday. Virgin Galactic stock rose 12.1% after it was approved to fly again following a Federal Aviation Administration investigation. CarMax fell 12.6% for the biggest drop in the S&P 500 since reporting disappointing fiscal second-quarter profits.
Homebuilders largely fell after a report showed average long-term mortgage rates climbed above 3% this week for the first time since June. Mortgage rates track the direction in the 10-year Treasury yield. According to mortgage buyer Freddie Mac, the average rate for a 30-year mortgage rose to 3.01%. The rate averaged 2.88% last week and a year ago.
High mortgage rates limit the purchasing power of homebuyers, potentially something homeowners will have. LGI Homes fell 5.1% and PulteGroup 4.2%.