S&P 500 fell 4.8% in September, worst month since March 2020

By DAMIAN J. TROISE and ALEX VEIGA AP Business Writers

Stocks are closing out September with their worst monthly loss since the beginning of the pandemic. The S&P 500 ended the month down 4.8%, its first monthly drop since January and the biggest since March 2020. 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% Thursday. It’s still up 14.7% for the year.

AP’s earlier story follows below.

Major stock indexes on Wall Street were mixed in afternoon trading Thursday, headed for steep monthly losses.

The S&P 500 was down 0.2% as of 2:48 p.m. Eastern after having been down 1% in the early going. The Dow Jones Industrial Average fell 252 points, or 0.7%, to 34,153, while the Nasdaq recovered from an early stumble and rose 0.5%.

Banks, industrial stocks and a mix of companies that provide consumer goods and services posted some of the biggest losses. That kept gains in technology and communication stocks in check. Still, 70% of stocks in the benchmark S&P 500 fell.

Investors have had their eyes on Washington, where Democrats and Republicans in Congress have been wrestling over extending the nation’s debt limit. The Senate passed a bill Thursday afternoon to avoid a partial federal shutdown and keep the government funded through Dec. 3. The House is expected to follow suit, but Congress’ dispute over whether to raise the government’s borrowing cap remains unresolved.

Treasury Secretary Janet Yellen has said that if the debt limit isn’t raised by Oct. 18, the United States probably will face a financial crisis and economic recession..

The broader market has stumbled through September as investors try 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.

The benchmark S&P 500 is down 4% in September and is headed for its worst monthly loss since March 2020. The index is still on track to eke out a 1.1% gain this quarter, but that would be its smallest quarterly gain since the pandemic stunned the economy and financial markets.

“It’s not really surprising that we’re seeing a weaker September because historically its the worst month on average,” said Jay Pestrichelli, CEO, of investment firm ZEGA Financial. “Unfortunately, there’s not a lot of information to glean for October from it.”

Investors have been weighing worrisome economic data that revealed that the highly contagious delta variant crimped consumer spending and the job market’s recovery.

The weak signals for economic growth continued Thursday as the Labor 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%, which was slightly better than economists expected, but they expect growth to slow to 5.5% 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 labor issues.

Inflation will likely remain the key concern hanging over the markets for the rest of the year, Pestrichelli said, and it could put the Federal Reserve in the tough position of having to raise rates earlier than anticipated.

Investors are still trying to gauge whether those issues are temporary and part of the economic recovery or could linger longer than expected. The upcoming round of corporate earnings reports could shed light on how companies are dealing with those problems.

“The jury is still out on this and we don’t really know if it’s demand-driven or supply-driven inflation,” Pestrichelli said. “If you end up getting lower growth and higher inflation, then you get stagflation and that’s no good for the market.”

Bond yields edged lower. The yield on the 10-year Treasury note, a benchmark for many kinds of loans, fell to 1.53% from 1.54% from late Wednesday. It was as low as 1.32% just over a week ago.

Several companies made outsized gains and losses following corporate news on Thursday. Virgin Galactic’s stock soared 13.8% after it was cleared to fly again following a Federal Aviation Administration inquiry. CarMax slumped 10.9% after reporting disappointing fiscal second-quarter profits.

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