By Lewis Krauskopf, Shashwat Chauhan and Shristi Achar A
(RockedBuzz via Reuters) – The S&P 500 index closed lower on Friday as investors digested the implications of the U.S. inflation report for the Federal Reserve’s interest rate policy and adjusted their portfolios on the final day of trading. a weak third quarter for stocks.
The S&P 500 and Nasdaq posted their largest monthly percentage declines of the year, while all three major indexes posted their first quarterly declines in 2023.
Data showed that the personal consumption expenditure (PCE) price index, excluding volatile food and energy components, rose 3.9% year-on-year for August, falling below 4% for the first time in over two years. The Fed tracks PCE price indices for its 2% inflation target.
Stocks initially pushed higher after the PCE report, but then faded.
The data revealed a “better-than-expected but still elevated inflation picture,” said Eric Freedman, chief investment officer at US Bank Asset Management.
Meanwhile, Freedman said, “we’re at the end of the quarter, and with the end of the quarter comes all kinds of activity in both the stock and bond markets.”
The Dow Jones Industrial Average fell 158.84 points, or 0.47%, to 33,507.5, the S&P 500 lost 11.65 points, or 0.27%, to 4,288.05 and the Nasdaq Composite gained 18.05 points, or 0.14%, to 13,219.32.
Among S&P 500 sectors, energy fell about 2% and financials fell 0.9%. Energy remained by far the biggest gainer in the third quarter.
“Energy and financials have been rising on a relative basis and are feeling a rebalancing effect today,” Freedman said.
For the quarter, the S&P 500 fell approximately 3.6%, the Dow 2.6%, and the Nasdaq 4.1%. In September, the S&P 500 fell 4.9%, the Dow fell 3.5% and the Nasdaq fell 5.8%.
The highly anticipated PCE data follows last week’s hawkish long-term outlook for rates from the Fed, which rattled stocks as benchmark Treasury yields rose to 16-year highs.
“Equity investors are finally realizing that the Fed will be higher for a longer period and that there is an alternative to stocks,” said Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest Wealth Management.
Investors were also keeping an eye on Washington. Hardline Republicans in the US House of Representatives have rejected a bill proposed by their leader to temporarily fund the government, making it all but certain that federal agencies will partially shut down starting Sunday.
Traders were also wary that a $16 billion JP Morgan fund, which is expected to reset its options positions on Friday, would be another source of market volatility.
In corporate news, Nike shares jumped 6.7% after the world’s largest sportswear maker beat Wall Street estimates for first-quarter profits.
On the NYSE, declining issues outnumbered rising ones by a ratio of 1.2 to 1. There were 54 new highs and 142 new lows on the NYSE.
On the Nasdaq, advancing issues outnumbered declining ones by a ratio of 1.1 to 1. The Nasdaq posted 46 new highs and 168 new lows.
Around 11.3 billion shares changed hands on US stock exchanges, compared to the daily average of 10.4 billion over the last 20 sessions.
(Reporting by Lewis Krauskopf in New York, Shashwat Chauhan and Shristi Achar A in Bangalore; Editing by Arun Koyyur, Maju Samuel and David Gregorio)