September worst month for stocks since pandemic hit U.S.

Wall Street ended a miserable September with a 9.3% loss, the worst monthly decline since March 2020. The S&P 500 fell 1.5% on Friday and is at its lowest level in nearly two years. The benchmark index has lost ground in six of the past seven weeks and posted its third straight losing quarter. The Dow Jones Industrial Average lost 1.7% and the Nasdaq fell 1.5%. Nike fell sharply after the company had to cut prices to clear inventory, while Carnival fell after weaker-than-expected quarterly results. Bond markets were calmer as yields eased.

Wall Street hit its worst levels in nearly two years on Friday as the end of what has been a miserable month for markets around the world nears.

The S&P 500 was down 0.4% in the afternoon after trading between small gains and losses in the morning. It’s at its lowest level since November 2020 and is on track for its sixth weekly loss in the past seven, one of the worst months since the coronavirus fallout in early 2020 and its third straight losing quarter .

The Dow Jones Industrial Average was down 213 points, or 0.7%, at 29,010 as of 1:56 p.m. ET, and the Nasdaq composite was down 0.2%.

The main reason for the struggles of financial markets this year has been the fear of a possible recession, as interest rates soar in the hope of lowering the high inflation that has swept the world.

The Federal Reserve has been at the forefront of the global campaign to slow economic growth and hurt labor markets just enough to undercut inflation, but not so much as to cause a recession. More data came in on Friday to suggest the Fed will keep its foot firmly on the brakes on the economy, raising the risk of going too far and triggering a crash.

The Fed’s preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep raising rates and keep them high for a while, as it has loudly and repeatedly promised.

Vice Chairman Lael Brainard was the latest Fed official on Friday to insist that he will not cut rates early. That helped dampen hopes on Wall Street of a “pivot” to easier rates as the economy slows.

“At this point, it’s not a question of whether we’re going to have a recession, but what kind of recession it’s going to be,” said Sean Sun, portfolio manager at Thornburg Investment Management.

Higher interest rates knock down one of the main levers that set stock prices. The other lever also appears to be under threat as the slowing economy, high interest rates and other factors weigh on corporate profits.

Cruise operator Carnival plunged 21% in one of Wall Street’s worst losses after it reported a bigger-than-expected latest quarter loss and revenue that fell short of expectations.

Nike fell 12.1 percent in what could be its worst day in two decades after it said its profitability weakened over the summer due to discounts needed to suddenly clear full warehouses. The amount of shoes and gear in Nike’s inventory increased 44% over the previous year.

The US dollar’s strong rise this year against other currencies also hurt Nike. Its worldwide revenue rose by just 4%, instead of the 10% it would have had if currency values ​​had remained the same.

Nike isn’t the only company seeing its inventories increase. There are also several big-name retailers, and such bad news for businesses could come as a relief to shoppers if it leads to more discounts. It echoed some buried cheer in Friday’s report on the Fed’s preferred inflation gauge. This showed some deceleration in goods inflation, although price gains continued to accelerate for services.

Another report on Friday also offered some hope. A measure of consumer sentiment showed US expectations for future inflation fell in September. This is crucial for the Fed because pent-up expectations of higher inflation can create a weakening, self-reinforcing cycle that makes it worse.

Treasury yields edged lower on Friday, easing some of the pressure on markets.

The 10-year Treasury yield fell to 3.75% from 3.79% late Thursday. The two-year yield, which more closely tracks expectations for Fed action, sank to 4.16% from 4.19%.

Still, a long list of other concerns continue to hang over global markets, including rising tensions between much of Europe and Russia following the invasion of Ukraine. A controversial plan to cut taxes from the UK government also sent bond markets reeling recently on fears it could further worsen inflation. Bond markets calmed somewhat only after the Bank of England pledged mid-week to buy, but plenty of UK government bonds are needed to bring yields back up.

Meanwhile, the US dollar’s impressive and rapid rise against other currencies raises the risk of creating so much stress that something cracks somewhere in global markets.

Stocks around the world were mixed after a report showed inflation in the 19 countries that use the European euro rose to a record and data from China said factory activity weakened there.

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