The S&P 500 fell after U.S. inflation data, ending the weakest third quarter

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City on September 28, 2023. REUTERS/Brendan McDermid/File Photo Get license rights

  • All three indices recorded quarterly declines
  • PCE data shows easing underlying price pressures
  • Republicans reject funding bill, government shutdown imminent
  • Nike shares surged in first-quarter gains
  • Indexes: Dow down 0.47%, S&P down 0.27%, Nasdaq up 0.14%

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

The S&P 500 and Nasdaq posted their biggest monthly percentage declines of the year, while all three major indexes had first-quarter declines in 2023.

The personal consumption expenditures (PCE) price index, which excludes volatile food and energy components, rose 3.9% on an annualized basis for August, falling below 4% for the first time in two years. The central bank monitors PCE price indices for its 2% inflation target.

Stocks rose initially after the PCE report, but then faded.

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

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

The Dow Jones Industrial Average (.DJI) fell 158.84 points, or 0.47%, to 33,507.5, the S&P 500 (.SPX) lost 11.65 points, or 0.27%, to 4,288.05 and the Nasdaq Composite added 8 points, or 5.IX. 0.14%, 13,219.32.

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Among S&P 500 sectors, energy (.SPNY) fell about 2% and financials (.SPSY) fell 0.9%. Energy was the most profitable sector in the third quarter.

“Energy and finance are relatively high, and they’re feeling some of the realignment effect today,” Friedman said.

For the quarter, the S&P 500 fell about 3.6%, the Dow lost 2.6% and the Nasdaq fell 4.1%. In September, the S&P 500 fell 4.9%, the Dow fell 3.5%, and the Nasdaq fell 5.8%.

The much-anticipated PCE data followed last week’s hawkish longer-term outlook for the central bank’s rates, which weighed on stocks as the benchmark Treasury yield rose to a 16-year high.

“Equity investors are finally coming to terms with the Fed and the Fed’s view that it’s too much for the long term, and 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, confirming that federal agencies would partially shut down starting Sunday.

The $16 billion JPMorgan fund, which is expected to reset its option positions on Friday, warned traders that it could be another source of market volatility.

In company news, Nike ( NKE.N ) shares rose 6.7% after the world’s biggest sportswear maker topped Wall Street estimates for first-quarter profit.

Declining issues outnumbered advancers on the NYSE by a 1.2-to-1 ratio. There were 54 new highs and 142 new lows on the NYSE.

On the Nasdaq, advancing issues outnumber decliners by a 1.1-to-1 ratio. The Nasdaq posted 46 new highs and 168 new lows.

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About 11.3 billion shares changed hands on U.S. exchanges, compared with the daily average of 10.4 billion over the past 20 sessions.

Reporting by Louis Kraskopp in New York, Shashwat Chauhan and Sristi Achar in Bangalore; Editing by Arun Koiyur, Maju Samuel and David Gregorio

Our Standards: Thomson Reuters Trust Principles.

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

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