Wall St posts 3rd straight quarterly loss as inflation weighs, recession looms

THE S&P 500 closed the books on its steepest September decline in two decades yesterday (Sept 30), skidding across the finish line of a tumultuous quarter fraught with historically hot inflation, rising interest rates and recession fears.

All three major indexes veered to a sharply lower end, having quashed a brief rally early in the session.

The S&P and the Dow notched their third consecutive weekly declines while all three indexes posted their second straight monthly losses.

The Dow Jones Industrial Average fell 500.1 points or 1.71% to 28,725.51; the S&P 500 lost 54.85 points or 1.51% to 3,585.62; and the Nasdaq Composite dropped 161.89 points or 1.51% to 10,575.62.

In the first nine months of 2022, Wall Street suffered three quarterly declines in a row, the longest losing streak for the S&P and the Nasdaq since 2008 and the Dow’s longest quarterly slump in seven years.

“It’s another ugly day to end an ugly quarter in what’s looking like a very ugly year,” said Carson Group chief market strategist Ryan Detrick.

“Investors will look back and realise this was the year the Fed pulled a total 180 on their views on inflation and quickly turned incredibly hawkish.”

The US Federal Reserve has rattled markets by engaging in its most relentless series of interest rate hikes in decades in order to rein in stubbornly high inflation, which has many market participants eyeing key economic data for signs of a looming recession.

“The realisation that the Fed is doing anything they can to combat 40-year-high inflation has investors worried they will push the economy over the edge and into recession,” Detrick added.

The Commerce Department’s personal consumption expenditures (PCE) report did little to assuage those fears.

“Hawkish monetary policy”

While the report shows that consumers continue to spend, the prices they are paying have accelerated, drifting further beyond the Fed’s inflation target and all but ensuring the central bank’s hawkish monetary policy will continue longer than investors had hoped.

Recession fears also echoed through dire warnings from Nike Inc and cruise operator Carnival Corp, both citing inflation-related margin pressures. Shares of both companies tanked by 12.8% and 23.3% respectively.

Among the 11 major sectors of the S&P 500, real estate was the sole gainer while utility tech suffered the largest percentage losses.

Apple Inc, Microsoft Corp, Amazon.com and Nike weighed the heaviest.

Corporate earnings reports for the quarter that ends with Friday’s closing bell will begin landing in a few weeks, with analyst expectations trending downward.

Analysts now see annual S&P 500 earnings growth of 4.5% on aggregate, down from the 11.1% estimate when the quarter began.

Quarter-end fund reallocations and the so-called “window dressing” has likely contributed to the session’s volatility.

Declining issues outnumbered advancing ones on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.38-to-1 ratio favoured decliners.

The S&P 500 posted no new 52-week highs and 93 new lows; the Nasdaq Composite recorded 27 new highs and 380 new lows.

Volume on US exchanges was 12.44 billion shares, compared with the 11.45 billion average over the last 20 trading days. – Oct 1, 2022

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