AP – Wall Street capped another turbulent week of trading on Friday with a broad slide in stocks that left the S&P 500 with its third-straight weekly loss.
The S&P 500 fell 1.1 per cent, led once again by a sell-off in technology companies, with Apple, Amazon and Alphabet weighing particularly on the market. Technology stocks and other companies that powered the market’s strong comeback this year suddenly lost momentum this month amid worries that they have become too expensive.
The sell-off wiped out the last of the solid gains the market saw to start the week. The S&P 500 is on track for its first monthly loss since March. September is historically the worst month for stocks.
“The market has been poised to just pull back, take a breather,” Chief Market Strategist at Prudential Financial Quincy Krosby said. “Raising capital is prudent during a month that is known statistically, historically for being difficult for the market.”
The S&P 500 fell 37.54 points to 3,319.47. The decline marks the the first three-week losing streak for the benchmark index since last October. The Dow Jones Industrial Average dropped 244.56 points, or 0.9 per cent, to 27,657.42. The Nasdaq composite shed an early gain, losing 116.99 points, or 1.1 per cent, to 10,793.28. Smaller stocks also fell, with the Russell 2000 index of small caps giving up 5.82 points, or 0.4 per cent, to 1,536.78.
Momentum in the market shifted on Wednesday after the Federal Reserve said the outlook for the United States (US) economy remains uncertain and policymakers expect short-term interest rates to stay at record lows through 2023. Low rates typically turbocharge the market by encouraging investors to pay higher prices for stocks, but some investors may have been looking for the Fed to be more aggressive.
Growth in some areas of the economy also slowed after supplemental unemployment benefits and other aid from the federal government expired, and partisan disagreements in Congress are holding up a possible renewal of support. Investors said it is essential that such aid arrives.
“To the extent that you don’t get an additional fiscal cushion, the economy is going to be impacted by it,” Global Market Strategist at Invesco Brian Levitt said.
Big Tech stocks stumbled sharply this month on worries that their prices have grown too expensive following their virtuosic performance through the pandemic. Surging shares of Apple, Microsoft, Amazon and others helped carry Wall Street back to record heights, even as the pandemic walloped much of the economy, as the coronavirus accelerated work-from-home and other trends that benefit them.
But they suddenly lost momentum two weeks ago, causing the market to swing with them. Because these companies grew so massive, their stock movements have huge sway over broad market indexes, such as the S&P 500.
“We certainly got a little short-term overbought and we headed into a time of the year that is not great for markets,” Levitt said.
On Friday, several Big Tech stocks continued slipping. Apple dropped 3.2 per cent, Microsoft fell 1.2 per cent and Amazon slid 1.8 per cent.
Also on the long list of concerns for markets is how the pandemic progresses, whether a vaccine for COVID-19 could indeed be available in early 2021 as many investors expect and what November’s US presidential election will do to the economy.
Treasury yields remain very low, showing the powerful strength of the Federal Reserve and continued expectations by bond investors for only modest economic growth and inflation. The yield on the 10-year Treasury rose to 0.70 per cent from 0.69 per cent late Thursday.
A preliminary report on Friday said consumer sentiment is improving at a faster pace than economists expected, which is key for an economy where spending by consumers is the main driver. But it follows other reports this week that showed growth in retail sales slowed last month and the number of layoffs across the country remains stubbornly high.
One factor that may have helped make trading bumpier than usual on Friday is an event known as “quadruple witching”, which marks the expiration of futures and options on stocks and indexes. The event can drive swings in prices. Other stock markets around the world made mostly modest moves.
In Europe, the German DAX lost 0.7 per cent, and the French CAC 40 sank 1.2 per cent. The FTSE 100 in London fell 0.7 per cent. Markets in Asia closed mostly higher.
Benchmark US crude oil fell 0.2 per cent to USD40.89 to per barrel. Brent crude, the international standard, fell 0.8 per cent to USD42.95 per barrel.