US stocks suffer worst monthly loss since March 2020

Investors are warily eyeing the global energy crunch, the US debt ceiling debate and plans by the US Federal Reserve to wind down some of its pandemic-related economic support, among other factors.

Political wrangling in Washington is worrying traders, threatening to push the United States into default and to force President Joe Biden to scale back his spending agenda [File: Michael Nagle/Bloomberg]

Volatility continued to roil financial markets, with U.S. equities notching their biggest monthly selloff since March 2020.

Stocks pushed lower on Thursday even after confirmation that the House passed a nine-week spending bill to avert a U.S. government shutdown. For traders, that was just one within a litany of risks. Investors are also bracing for the Federal Reserve to wind down its stimulus amid mounting fears about slowing economic growth, elevated inflation, supply-chain bottlenecks, a global energy crunch and regulatory risks emanating from China.

Political wrangling in Washington is threatening to push the U.S. into default and force President Joe Biden to scale back his spending agenda. Democratic Senator Joe Manchin wants the social-spending package cut by more than half to $1.5 trillion. House Speaker Nancy Pelosi was pressing ahead with a vote on a bipartisan infrastructure bill, even though progressive Democrats said they have the numbers to stall it until the Senate agrees on a more expansive tax and spending package.

“The old adage, the market climbs a wall of worry, is not lost on us,” said Tom Mantione, managing director at UBS Private Wealth Management. “Worries about China, the pandemic, the debt ceiling and tax legislation are weighing on investors right now, but it is important to understand which issues may create structural change and which ones create short-term volatility that investors can take advantage of.”

The S&P 500 closed at the lowest level since July, extending its September losses to almost 5%. Economically sensitive companies like industrials and financials were among the worst performers on Thursday. The slide almost wiped out the index’s gains for the quarter.

A near-record technical streak for the S&P 500 has some bulls worried that a sharp pullback is overdue.

“The S&P 500 has now gone an incredible 317 trading days in a row above its 200-day moving average, one of the longest streaks ever,” according to Ryan Detrick, chief market strategist at LPL Financial. “What we are getting at is a 5-7% pullback could potentially come at any time given we haven’t had one in so long.”

Elsewhere, oil closed the month almost 10% higher after a tumultuous session during which China was said to order its top energy companies to secure energy supplies at all costs amid shortages, prompting the White House to reiterate its own concerns over rising prices.

Here are some events to watch this week:

  • Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 1.2% as of 4 p.m. New York time
  • The Nasdaq 100 fell 0.4%
  • The Dow Jones Industrial Average fell 1.6%
  • The MSCI World index fell 0.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro fell 0.1% to $1.1581
  • The British pound rose 0.4% to $1.3475
  • The Japanese yen rose 0.6% to 111.29 per dollar

Bonds

  • The yield on 10-year Treasuries was little changed at 1.52%
  • Germany’s 10-year yield advanced one basis point to -0.20%
  • Britain’s 10-year yield advanced three basis points to 1.02%

Commodities

  • West Texas Intermediate crude rose 0.2% to $75.01 a barrel
  • Gold futures rose 2% to $1,756.70 an ounce
Source: Bloomberg

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