Stocks Finish a Rough September in the Red…..

U.S. equities finished lower, with the major indexes posting solid losses on a monthly basis. Volatility continued amid further signs of the impact of the Delta variant and the intensified supply-chain disruption that has boosted inflation pressures and helped solidify expectations of global monetary policy tightening. Uncertainty also lingered regarding the U.S. debt ceiling debate, but lawmakers were able to cobble together and pass a stopgap spending measure, sending it to President Biden’s desk hours before a government shutdown. A host of global economic data was sifted through, including U.S economic reports that showed jobless claims unexpectedly accelerated, the final read on Q2 GDP was surprisingly revised higher, and Chicago manufacturing growth slowed more than expected but remained comfortably in expansion territory. Meanwhile, Fed Chairman Powell and Treasury Secretary Yellen concluded their two days of Congressional testimony. On the equity front, Bed Bath & Beyond tumbled after missing estimates and slashing guidance due to the supply-chain disruption and inflation pressures, while a profit miss by CarMax weighed on its shares. Treasuries were mixed, and the U.S. dollar nudged lower after reaching highs not seen in a year, while gold rallied and crude oil prices moved modestly to the upside. Europe finished mostly lower following the data and amid the lingering uncertainties, while markets in Asia were mixed.

The Dow Jones Industrial Average lost 547 points (1.6%) to 33,844, the S&P 500 Index decreased 52 points (1.2%) to 4,308, and the Nasdaq Composite fell 64 points (0.4%) to 14,449. In heavy volume, 1.1 billion shares were traded on the NYSE and 5.8 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.20 higher to $75.03 per barrel. Elsewhere, the gold spot price jumped $33.30 to $1,756.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.1% lower to 94.23.

Stocks were solidly lower for the month of September, as the DJIA lost 2.7%, the S&P 500 shed 3.3%, and the Nasdaq Composite tumbled 4.0%. For Q3, the DJIA decreased 1.9%, the S&P 500 increased 0.2%, and the Nasdaq Composite declined 0.4%.

September and October have historically been blustery months for stock market performance, and the stock market has wobbled noticeably as of late on persistent concerns over the debt ceiling, the ultimate impact of intensifying global supply-chain disruptions on inflation, along with increased expectations that the Fed is moving closer to tightening policy which has resulted in a recent spike in Treasury yields.

Weekly initial jobless claims came in at a level of 362,000 for the week ended September 25, versus the Bloomberg estimate of 330,000 and compared to the prior week’s unrevised 351,000 level. The four-week moving average rose by 4,250 to 340,000, and continuing claims for the week ended September 18 declined by 18,000 to 2,802,000, above estimates of 2,790,000. The four-week moving average of continuing claims dipped by 750 to 2,797,250.

The final look (of three) at Q2 Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 6.7%, compared to forecasts calling for it to remain at the 6.6% growth rate posted in the second release. Q1’s figure was unadjusted at a 6.3% increase. Personal consumption was revised to a 12.0% rise for Q2 from the previous estimate of an 11.9% gain and versus expectations to be unrevised. Q1 consumption was unadjusted at an 11.4% gain.

On inflation, the GDP Price Index was unrevised at a 6.1% rise, matching forecasts, while the core PCE Index, which excludes food and energy, was also unrevised at a 6.1% advance, in line with estimates.

The Chicago PMI slipped more than expected but remained comfortably at a level depicting expansion (a reading above 50). The index declined to 64.7 in September from August’s 66.8 reading, versus estimates calling for a decrease to 65.0. The larger-than-expected decline came as growth in new orders and production both slowed, along with order backlogs, though employment reversed back to expansion territory. Inflation pressures remained elevated even as prices paid rose at a slower pace.

Treasuries were mixed amid continued volatility in yields following a recent jump that has come from last week’s Fed’s monetary policy decision which delivered notable changes in the Central Bank’s economic/inflation projections and rate hike expectations, while hinting that formal details of balance sheet tapering may come in November.

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