End of Month For the Stock Market Closes At Its Worst in 20 Years

End of Month For the Stock Market Closes At Its Worst in 20 Years by bloombergsubscription

The stock market was trying to rebound Friday at the end of a rough September. Stocks were largely shaking off another stronger-than-expected inflation reading.

The Dow Jones Industrial Average slipped 63 points or 0.2%. The S&P 500 was flat, while the Nasdaq Composite added 0.2%, As reported by Bloomberg Subscription

The indexes all tumbled more than 1.5% Thursday, but the pain has been inflicted all month. The Dow is set to close out September with the worst one-month performance since the Covid-19 selloff of March 2020, with all three major indexes seeing the most significant declines in the first nine months of the year since 2002.

“A stormy quarter is drawing to a close. Hopes for a soft economic landing have all but vanished as the Fed continues to beat the drums of forceful rate increases, sending financial markets into a tailspin,” said Marios Hadjikyriacos, an analyst at broker XM.

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Friday, the Commerce Department reported that the Core Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred measure of inflation, rose 0.6% in August, a tick above the expected 0.5% increase.

That’s true, but markets were already aware that inflation was too hot in August. That’s why bond yields remain below key levels Friday – and that’s important for the economy and the stock market.

On Friday, the 2-year Treasury yield, a barometer for expectations for the federal funds rate, dipped to 4.163%, while the 10-year slipped to 3.706% after having touched a multi-year high of just over 3.9% this week.

For the stock market, October is a coin flip. In a September when the Dow has finished down 7% or more—as it is poised to do—it tends to fall in October, too, with fewer than 50% finishing the month higher, with an average decline of just 1.5%.

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The good news: the market is stabilizing for now above a key support level. The S&P 500 has seen buyers step in around the 3630 level since June, including a small rally in the final few hours of trading Thursday.

The bad news: it still has to reclaim several levels above its current status for Wall Street to grow more optimistic about the market outlook. It’s still in a bear market, defined as a 20% or more significant fall from an all-time high, which it hit in early January.

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