A long list of worries caught up with Wall Street in September, the stock market’s worst month since the early days of the pandemic.
After falling 1.2 percent on Thursday, the S&P 500 ended the month down 4.8 percent, the largest monthly decline since March 2020 and one that posted a seven-month profit streak.
By the recent decline, investors had shaken off the advent of the delta variant of the coronavirus, problems with a secure supply chain, and ongoing inflation, with the S&P 500 rising to a record September 2 and a staggering 21 percent since the beginning of the year Year. But stocks began to fall as concerns increased over the political deadlock that led to a US default and as instability in China’s housing market rocked Wall Street.
With investors also watching the Federal Reserve’s plans to slow their purchases of government-backed bonds, 10-year Treasury bond yields jumped to their highest level in months, hitting 1.55 percent on Wednesday.
Big tech stocks, which have an oversized impact on major stock indices and typically fall as bonds become more attractive to investors, posted double-digit declines. Apple ended the month nearly 10 percent below its September 7th record.
Adding to the nervousness earlier in the month were concerns that a default by the China Evergrande Group would hit global markets. The company, which is about $ 300 billion in debt, has suffered multiple payment deadlines. Those concerns have eased somewhat in recent days, in part because the company said it is selling a stake in Shengjing Bank for approximately $ 1.5 billion, with the proceeds being used to pay off its debt.
Retail stocks were among the worst on Thursday. Used car dealer CarMax lost nearly 13 percent while Gap closed 8 percent lower. Bed Bath & Beyond slipped 22 percent after the company cut its sales and earnings forecasts.
Supply chain constraints continued to weigh on these companies, with many anticipating delays and shortages of goods, along with higher labor costs and already skyrocketing shipping costs. Consumer confidence is at its lowest level in seven months, the Conference Board reported Tuesday.
Concerns about retailers were heightened this month as factories in Vietnam were forced to close or operate at severely reduced capacity as coronavirus cases increased. Power outages and blackouts also slowed or shut down factories across China this week.
“Persistent supply chain constraints have become a major hurdle to restocking,” Lydia Boussour, senior economist at Oxford Economics, wrote in a note. “Assuming that the global virus situation will gradually improve, we expect that bottlenecks will decrease in 2022 when production is ramped up and the ship congestion dissipates.”
Sentiment was also voiced by Fed chairman Jerome H. Powell when he stated in a testimony to the Senate on Wednesday that while demand in the United States was strong, factory closures and shipping problems drove inflation through the Fed- Target drifted by an average of 2 percent.