Will the Brutal September in the New York Stock Market Turn to Smiles in October?

S&P 500 Falls 4.8%, Nasdaq Plummets 5.3%
US Government Shutdown Concerns Fade but Default Risk and Tapering Remain
Growing Worries Over Corporate Profit Decline Amid Inflation Spread

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The New York stock market closed September with the largest drop this year. Although the U.S. Congress passed a temporary budget bill and President Joe Biden signed it, averting a federal government shutdown, concerns remain over the debt ceiling increase, and the ongoing rise in inflation makes the October market outlook pessimistic.

On the 30th of last month (local time), the Dow Jones Industrial Average fell 1.59%, the S&P 500 index dropped 1.19%, and the Nasdaq index declined 0.44%. The S&P 500, which represents the overall New York stock market, recorded a monthly decline of 4.8%. This was the largest monthly drop since the market crash caused by the COVID-19 outbreak in March last year. The Dow also fell 4.3%, but the Nasdaq, affected by rising U.S. Treasury yields, plunged 5.3%.

The U.S. 10-year Treasury yield, which had suppressed the market by recording over 1.5% for two consecutive days, fell to the 1.4% range in the afternoon, but it is too early to be reassured.

The impact of rising inflation is spreading in the New York stock market as well. Following the previous day’s Dollar Tree, a $1 shop, effectively abandoning its $1 pricing policy due to inflation and supply chain disruptions, concerns arose on this day that the poor earnings of household goods company Bed Bath & Beyond, caused by supply chain issues, could spread to most companies.

The stock market outlook after October is also pessimistic. Inflation concerns are expected to seriously affect corporate earnings, and an important event?the Federal Reserve’s tapering of asset purchases?remains.

According to The Wall Street Journal, among the S&P 500 companies that announced earnings since June, 224 cited inflation concerns. This is the largest number since FactSet began tracking in 2010. Citigroup’s Economic Surprise Index, which analyzes whether U.S. companies’ earnings reports exceeded or fell short of expectations, also dropped to its lowest level since June 2020.

Michael Wilson, Morgan Stanley’s investment strategist, predicted, "The more companies mention inflation, the more profits will decrease." Karin Canover, Chief Investment Officer at Carolina Wealth Management, also forecasted, "The 2022 stock market situation is worrisome."

This content was produced with the assistance of AI translation services.