S&P 500 slides following US inflation data, concluding weak Q3

In the last day of a weak third quarter for stocks, the S&P 500 ended lower as investors considered the implications of a US inflation report for the Federal Reserve’s interest rate policy. The data showed that the personal consumption expenditures (PCE) price index, excluding food and energy, increased 3.9% on an annual basis for August, falling below 4% for the first time in over two years. This presents a “better than expected but still elevated inflation picture,” according to Eric Freedman, chief investment officer at U.S. Bank Asset Management. Alongside the inflation concerns, Republicans rejected a funding bill, making a government shutdown likely, further adding to investor worries.

The S&P 500 posted its largest monthly percentage drop of the year, and all three major indexes experienced their first quarterly declines in 2023. Energy and financial sectors, which had been performing strongly throughout the quarter, experienced significant declines. This is likely due to a rebalancing effect as the quarter comes to an end. The hawkish long-term outlook on interest rates from the Federal Reserve, coupled with rising Treasury yields, has caused concern and volatility in the stock market. Investors are starting to realize the potential alternatives to stocks, leading to a decreased market appetite.

In company news, Nike shares saw a jump after the sportswear giant exceeded Wall Street’s expectations for first-quarter profit. This positive news provided some relief amidst the overall downward trend of the market. However, market participants remained cautious due to uncertainties surrounding the partial government shutdown and the potential volatility caused by the reset of options positions by the $16 billion JP Morgan fund. Overall, the markets closed the quarter on a weak note, with inflation concerns and political instability casting a shadow over investor sentiment.

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