Company / Analytics

Analytics, 06 October 2022

September recap: Stocks battered lower

Historically, September has not been a good month for stocks in the US. It was yet another stubborn and popular annual dropoff, known as the “September Effect” where by definition, September is the month when the country’s stock market’s three leading indexes usually perform the poorest.

This month was no different. The S&P 500 fell 9% for its worst month since March 2020, marking the first time the S&P declined for three straight quarters since 2009.

Besides the September Effect, other factors including fears that the Federal Reserve will continue to raise interest rates for longer than anticipated policy plans as inflation remains stubborn are believed to have caused the slump. Despite a strong August jobs report, which triggered a slight boost in the stock markets, the fed raising interest rates eventually collapsed the markets.

Below are more highlights of what happened in stocks and the broader trading markets in the month of September.

Stocks tumble

The declines in US stocks in September were accelerated on September 13 after data from the Labor Department revealed that consumer prices rose faster than expected in August, causing the S&P 500 to fall by 4%, its largest single-day loss of the year. This for investors meant that the fed was expected to further raise interest rates as it attempts to bring down inflation.

For the month of September, the S&P 500 and the tech-heavy Nasdaq fell nearly 10% each. This marked their worst month since 2008, and the first time the S&P declined for three straight quarters since 2009. As for the Dow Jones Industrial Average, it was down 9.2% for the month, nearly 3,000 points. This marked the worst month since March 2020, its 10th-worst month this millennium and its worst September since 2002, even worse than its 6% drop in September 2008 during the financial crisis.

Stocks remain on pace for one of their worst years, with the Dow, S&P and Nasdaq down 21%, 25% and 33% year-to-date, respectively. None of the indices have ended the year down more than 10% since 2008.

In small-cap stock, the iShares Russell 2000 ETF (IWM) typically used as a small-cap measure, dropped about the same percentage as the major indices.

The biggest losers

The biggest losers in the month of September were Carnival and Nike. Cruise ship operator Carnival dropped 23.3% for the biggest decline among S&P 500 stocks after it reported a bigger loss for its latest quarter than analysts expected and revenue that fell short of expectations. Nike on the other hand slumped 12.8%, its worst day in more than 20 years, after it said its profitability weakened during the summer because of discounts needed to clear suddenly overstuffed warehouses. The amount of shoes and gear in Nike’s inventories swelled by 44% from a year earlier.

Stocks were also affecte by the rising value of the dollar, with the example of Nike where its worldwide revenue rose only 4%, instead of the 10% it would have if currency values had remained the same.

Other losers in the month included Getty Images (GETY) and Sotera Health (SHC). Getti Images recently was doing very well as the company’s shares tripled in price during a short squeeze in the days following its July 25 IPO via a SPAC merger, but it has since retreated to below its initial price of $10 per share. It fell 67% in September and now trades at $6.60. In the case of Sotera Health, the US company declined 58% this month after a jury found its Sterigenics business liable for causing a woman’s breast cancer due to carcinogenic emissions from its plant in a Chicago suburb and awarded the woman $363 million in damages.

Yields rise as US bond witness massive outflows

In the last week of September, U.S. bond funds witnessed massive outflows as investors girded for further rates hikes from the Federal Reserve to control stubborn inflation. A net of $9.08 billion was withdrawn out of U.S. bond funds, marking their biggest weekly net selling since June 22. This resulted in a rise in treasury yields, as the benchmark U.S. Treasury 10-year yields , which move inversely to prices, briefly jumped to 4.019% on September 28th, the highest since Oct. 2008.

In the same last week however, government bond funds however, received $6.92 billion, marking their biggest weekly inflow since May 18.

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