In the waning days of September, investors are on edge, facing a persistently grim stock market outlook, with indications suggesting another challenging month for stocks in October, defying hopes of a reprieve.
In a recap of the month’s performance, the S&P 500 (^GSPC) witnessed a 5% decline, while the Nasdaq Composite (^IXIC) experienced a steeper drop of 6.5%. The Dow Jones Industrial Average (^DJI) fared slightly better, with a 3.4% decrease.
Market apprehension stemmed from a confluence of factors, including the looming threat of a government shutdown set to commence this weekend. Additionally, concerns were raised over the potential for yet another interest rate hike before year-end, as highlighted by Chicago Fed President Austan Goolsbee in an interview with Yahoo Finance. The specter of elevated interest rates extending into 2024 further exacerbated apprehensions. Notably, the ascent of oil prices toward the $100 per barrel mark weighed heavily on investor sentiment.
The somber mood cast a shadow over prominent tech giants, with Netflix (NFLX) enduring a significant 15% dip over the past three weeks, and Apple (AAPL) experiencing a 9.8% decline despite favorable reports on new iPhone demand. Even Salesforce (CRM) wasn’t immune, as it retracted by 8% following the unveiling of innovative AI tools at the Dreamforce conference.
In a candid assessment, market analyst Kenny Polcari, managing partner of Kace Capital Advisors, observed, “I think it’s all coming home to roost as investors realize that the Fed does not have this under control and that the economy is struggling.”
The week bore witness to a series of events underscoring economic strains:
– Target announced the closure of nine stores, citing escalating retail crime as a contributing factor.
– Costco, in its earnings call, noted a lack of a “dramatic” upswing in thefts, signaling a concerning trend.
– Consumer confidence hit a four-month nadir.
– Housing data revealed a decline in home purchases.
– H&M issued a warning of plummeting sales in September, attributing the slump to unseasonably warm weather in Europe.
Moreover, Bank of America sounded the alarm on mounting credit delinquencies, particularly spotlighting concerns for Kohl’s and Nordstrom. CarMax, a used car retailer, weathered a challenging quarter, as rising interest rates prompted consumers to defer auto purchases. The company also grappled with a year-over-year surge in credit losses.
These developments collectively signal escalating economic pressures, yet the market may not have fully adjusted to this reality. Lingering questions remain regarding the delayed impacts of Federal Reserve policy and the extent to which households perceive a slowdown in inflation.
Against this backdrop, the outlook for October appears decidedly uncertain, especially in the early weeks preceding the release of major bank earnings, which are poised to reflect the aforementioned consumer vulnerabilities.
Truist Chief Investment Officer Keith Lerner cautioned, “Our work suggests this correction in time and price has further to go, but at this point, we are still viewing this in the context of a choppy trading range.”
As September concludes, the somber performance of the stock market sets a cautious tone for the upcoming month of October, leaving investors bracing for potential challenges ahead.
Source: Yahoo Finance
