S&P 500’s Rocky Road: Another Weekly Loss Amid Inflation Worries

Dow Holds onto Weekly Gains Despite Friday’s Stock Market Decline

On Friday, U.S. stocks closed in the red as concerns over inflationary pressures loomed ahead of the Federal Reserve’s upcoming meeting and an auto workers strike added to market jitters.

Here’s how the major stock indexes performed:

  • The Dow Jones Industrial Average (DJIA) dropped 288.87 points, equivalent to 0.8%, closing at 34,618.24.
  • The S&P 500 (SPX) fell 54.78 points, or 1.2%, to finish at 4,450.32.
  • The Nasdaq Composite (COMP) declined by 217.72 points, or 1.6%, ending at 13,708.33.

For the week, the Dow managed to eke out a 0.1% gain, while the S&P 500 dipped 0.2%, and the technology-heavy Nasdaq faced a 0.4% decline, based on Dow Jones Market Data. Both the S&P 500 and Nasdaq experienced back-to-back weekly losses.

Factors Influencing the Market

Persistent inflation concerns continued to exert pressure on stocks as Treasury yields inched higher. Additionally, investor anxiety grew due to the initiation of an auto workers’ strike.

Marco Pirondini, Head of Equities for Amundi U.S., highlighted the challenging inflationary landscape, stating, “The market is starting to understand that the Fed will keep interest rates high for longer.”

The Federal Reserve, in its efforts to cool the economy and combat rising living costs in the U.S., is scheduled to hold a policy meeting the following week. Traders anticipate that the central bank will maintain its benchmark rate within the current target range of 5.25% to 5.5%.

Pirondini pointed out that the U.S. economy remains “fairly strong,” making it challenging to curb inflation. Fresh economic data for the day surpassed expectations, with U.S. industrial output and manufacturing activity in New York state both outperforming forecasts.

The Fed reported a 0.4% rise in industrial production for August, surpassing the 0.2% gain predicted by economists. Simultaneously, the New York Fed revealed positive data from its Empire State manufacturing survey, with the business conditions index climbing to 1.9 this month, contrary to economists’ expectations of a negative reading.

Another focal point for investors was the United Auto Workers’ strike against the Big Three U.S. automakers: Ford Motor Co. (F), General Motors Co. (GM), and Chrysler owner Stellantis (STLA). While the strike initially seemed inconsequential from a market perspective, analysts expressed concern that prolonged strikes could drive up car prices, exacerbating inflationary pressures and impacting the broader U.S. economy.

A survey from the University of Michigan indicated declining consumer sentiment for the second consecutive month in September. The survey also revealed that Americans expect inflation to average 3.1% in the next year, down from the previous month’s projection of 3.5% and marking the lowest reading in two and a half years.

Furthermore, rising Treasury yields weighed on U.S. equities in recent weeks, particularly affecting the information technology sector, which experienced a significant 2% drop, according to FactSet data.

Looking at the weekly performance, the S&P 500 remained relatively unchanged, with only a minor 0.2% slip.

With the majority of companies having reported their second-quarter earnings, the market lacked significant catalysts during the week. Randy Frederick, Managing Director of Trading and Derivatives at Charles Schwab, noted that the U.S. economy continued to exhibit stability, contributing to the current sideways market movement.

Notable Company Movements:

  • General Motors Co. (GM) shares rose by 0.9%, while Ford Motor Co. (F) dipped 0.1%, and Stellantis NV (STLA) gained 1.9% as nearly 13,000 United Auto Workers initiated a strike.
  • ARM Holdings PLC’s (ARM) American depositary receipts declined by 4.5% after a strong market debut the previous day.
  • Adobe Inc. (ADBE) shares dropped 4.2% as the software company announced revenue forecasts in line with Wall Street estimates.
  • Planet Fitness Inc. (PLNT) saw a significant tumble of 15.9% following the departure of CEO Chris Rondeau.
  • Walt Disney Co. (DIS) stock rose 1.3% as the company remained undecided on the future of ABC and other broadcast channels, which CEO Bob Iger had suggested could be sold.

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