Stocks drop as S&P 500 heads for a big loss in September
Stocks fell broadly on Wall Street on Thursday as major indices headed for large monthly losses.
The S&P 500 fell 0.8% at 12:58 p.m. EST. The Dow Jones Industrial Average lost 452 points, or 1.3%, to 33,937 and the Nasdaq was down 0.2%.
Banks and a range of businesses that provide consumer goods and services suffered some of the biggest losses. Almost 80% of the stocks in the benchmark S&P 500 have fallen.
Investors have their eyes on Washington, where Democrats and Republicans in Congress are fighting to extend the nation’s debt limit. Congress has decided to avoid a crisis, and the Senate is set to approve legislation to fund the federal government until early December.
The broader market stumbled through September as investors try to get a clearer picture of the economy’s trajectory amid inflation concerns and uncertainty over how COVID-19 will continue to impact industries and consumers.
The benchmark S&P 500 is down 4.4% in September and heading for its worst monthly loss since March 2020. The index is still on track to gain 0.6% this quarter, but this would be its smallest quarterly gain since the pandemic stunned the economy and financial markets.
“It’s hardly surprising that we are seeing a weaker September, as it’s historically the worst month on average,” said Jay Pestrichelli, CEO of investment firm ZEGA Financial. “Unfortunately, there isn’t a lot of information to be learned from this for October.”
Investors weighed in on worrying economic data which revealed that the highly contagious delta variant has reduced consumer spending and the labor market recovery.
Weak signs of economic growth continued on Thursday as the Labor Department reported that jobless claims rose for the third week in a row and were higher than economists expected. The Commerce Department raised its estimate of second-quarter economic growth to 6.7%, which was slightly better than economists expected, but they expect growth to slow to 5.5% in the third quarter. .
Inflation fears that had weighed on the market at the start of 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 many companies that have warned investors of supply chain issues, higher raw material costs and labor issues.
Inflation will likely remain the main concern in markets for the rest of the year, Pestrichelli said, and it could put the Federal Reserve in the difficult position of having to hike rates earlier than expected.
Investors are still trying to determine whether these problems are temporary and part of the economic recovery or could persist longer than expected. The next round of corporate earnings reports may shed some light on how companies are dealing with these issues.
“The jury is still out on that and we don’t really know if this is demand-driven or supply-driven inflation,” Pestrichelli said. “If you end up having lower growth and higher inflation then you get stagflation and that’s not good for the market.”
Bond yields fell slightly. The yield on the 10-year Treasury bill, a benchmark for many types of loans, fell to 1.51% from 1.54% on Wednesday night. It was as low as 1.32% just over a week ago.
Several companies made outsized gains and losses following the business news on Thursday. Virgin Galactic shares climbed 11.5% after being cleared to fly again following a Federal Aviation Administration investigation. CarMax fell 10.9% after reporting disappointing second quarter earnings.