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

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 benchmark S&P 500 also posted its biggest monthly percentage drop of the year.

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.

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 S&P 500 (.SPX) lost 11.37 points, or 0.26%, to end at 4,288.33, while the Nasdaq Composite (.IXIC) rose 18.05 points, or 0.18%, to 13,224.52, according to preliminary data. The Dow Jones Industrial Average (.DJI) fell 145.92 points, or 0.46%, to 33,511.55.

Among the S&P 500 sectors, energy (.SPNY) and financials (.SPSY) fell sharply. 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.

All three major indexes had first-quarter declines in 2023.

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

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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