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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% on Thursday, the S&P 500 ended down 4.8% for the month, its biggest monthly decline since March 2020 and one that ended a seven-month streak of gains.
Until the recent decline, investors had shied away from the emergence of the Delta variant of the coronavirus, tightened supply chain issues and persistent inflation, with the S&P 500 hitting a record high on September 2 and a dizzying gain of 21% since the start of the year. But stocks began to fall as concerns grew over the political deadlock leading to the United States defaulting on its debt and instability in the Chinese real estate market rocking Wall Street.
While investors also consider the Federal Reserve’s plans to start slowing its purchases of government guaranteed bonds, 10-year Treasury bill yields hit their highest level in months, hitting 1.55% Wednesday.
Large tech stocks, which have a disproportionate influence on major stock market indices and typically fall as bonds become more attractive to investors, posted double-digit declines. Apple ended the month nearly 10% off its September 7 record.
At the start of the month, there were fears that a default by the China Evergrande group would have repercussions on world markets. The company, which has approximately $ 300 billion in debt, has faced multiple payment deadlines. Those concerns have eased somewhat in recent days, in part when the company said it was selling a stake it held in Shengjing Bank for around $ 1.5 billion, with the proceeds going towards repayment. of its debts.
Retail stocks were among the worst performers on Thursday. Used-vehicle retailer CarMax fell nearly 13%, while Gap closed down 8%. Bed Bath & Beyond slipped about 22% after the company cut its sales and profit guidance.
Supply chain constraints continued to weigh on these companies, with many anticipated delays and shortages of goods, as well as higher labor prices and shipping costs already skyrocketing. Consumer confidence is at its lowest level in seven months, the Conference Board reported on Tuesday.
Concerns about retailers were magnified this month with factories in Vietnam forced to shut down or operate at significantly reduced capacity as cases of the coronavirus increased. Power cuts and blackouts also slowed or closed factories across China this week.
“Persistent supply chain constraints have become a major obstacle to restocking inventory,” wrote Lydia Boussour, chief economist at Oxford Economics, in a note. “Assuming the global virus situation gradually improves, we expect bottlenecks to ease in 2022 as production increases and shipping congestion begins to ease.”
The sentiment was also expressed by Jerome H. Powell, the chairman of the Fed, as he noted in Senate testimony Wednesday that while demand was strong in the United States, plant closures and problems of shipping pushed inflation above the Fed’s target of 2% on average. .
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