The S&P 500 fell after US inflation data, ending a weak third quarter

File photo: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, September 28, 2023. REUTERS/Brendan McDiarmid/File Photo Obtaining licensing rights

  • All three indices record quarterly declines
  • Personal consumption expenditures data show that underlying price pressures are easing
  • Republicans reject the funding bill, and a government shutdown is imminent
  • Nike shares jump with first-quarter earnings beat

September 29 (Reuters) – The S&P 500 index closed lower on Friday as investors digested the implications of the U.S. inflation report on the Federal Reserve’s interest rate policy and adjusted their portfolios on the final day of a weak third quarter for stocks.

The benchmark S&P 500 index also recorded its largest monthly percentage decline of the year.

The personal consumption expenditures price index, excluding volatile food and energy components, rose 3.9% year-on-year in August, the first time in more than two years that it fell below 4%, the data showed. The Fed tracks PCE price indexes for its 2% inflation target.

Eric Friedman, chief investment officer at U.S. Bank Asset Management, said the data revealed “a better-than-expected but still elevated inflation picture.”

Meanwhile, Friedman said, “We are at the end of the quarter, and with the end of the quarter comes all kinds of activity in the stock and bond markets.”

According to preliminary data, the Standard & Poor’s 500 Index (.SPX) lost 11.37 points, or 0.26%, to close at 4,288.33 points, while the Nasdaq Composite Index (.IXIC) rose 18.05 points, or 0.18%, to 13,224.52 points. The Dow Jones Industrial Average fell 145.92 points, or 0.46%, to 33,511.55 points.

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Among the S&P 500 sectors, energy (.SPNY) and financials (.SPSY) fell sharply. Energy remained by far the largest profitable sector in the third quarter.

“Energy and financial prices have risen on a relative basis, and they are feeling some rebalancing effect today,” Friedman said.

All three major indices saw their first quarterly declines in 2023.

The anticipated personal consumption expenditures data came on the heels of last week’s tighter long-term outlook for interest rates from the Federal Reserve, which rattled stocks as benchmark Treasury yields rose to their highest levels in 16 years.

“Equity investors are finally waking up to the Fed and the Fed’s comments that interest rates will be higher for longer, and that there is an alternative to stocks,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest Wealth Management.

Investors were also watching Washington. Hard-line Republicans in the US House of Representatives rejected a bill proposed by their leader to temporarily fund the government, making it certain that federal agencies will partially close their doors starting Sunday.

Traders are also concerned that JPMorgan’s $16 billion fund, which is expected to reset its options positions on Friday, will be another source of market volatility.

In company news, Nike shares jumped after the world’s largest sportswear maker beat Wall Street estimates for first-quarter earnings.

(Reporting by Louis Krauskopf in New York and Shiswat Chauhan and Shristi Achar A in Bengaluru – Preparing by Muhammad for the Arabic Bulletin – Preparing by Muhammad Jibril for the Arabic Bulletin) Editing by Arun Kuyur, Majo Samuel and David Gregorio

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Shristi is a reporter, part of the markets team reporting on equity markets across the US, UK, Canada, Europe and emerging markets.

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