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September Closes Out a Rough 3rd Quarter, S&P 500 Down 25% YTD

Weekly Update – September 30, 2022

  • The S&P 500 index fell 2.9% last week, its third consecutive week in the red, as investors concluded Q3 full of worries about the global economy.
  • The S&P 500 ended Friday’s session at 3,585.62, down from last week’s closing level of 3,693.23. This brought the index to a 5.3% drop for Q3, including a 9.3% loss for the month of September and marking its third consecutive quarter in the red. With just one quarter remaining in 2022, the S&P 500 is now down 25% for the year to date.
  • The S&P 500 has shed 12% in the past three weeks amid concerns about inflation, monetary tightening, and the effects on global economic growth. The slide comes as global central banks have been raising lending rates in an attempt to combat inflation, yet prices have remained elevated. With the Q3 earnings reporting season just weeks away, companies have been warning investors about the negative impacts of higher costs on their profitability.
  • In the latest week, bond market turmoil became another cause for concern and helped send the S&P 500 to lows not seen since November 2020. Also adding to worries, data showed the average 30-year mortgage rate is now at its highest level since 2007 and confirmed a prior estimate that the US economy contracted by 0.6% in Q2 following a 1.6% contraction in Q1.
  • Friday, fresh data showed while US consumer spending topped expectations for August, the Federal Reserve’s preferred inflation measure also rose by more than expected despite Fed efforts to tame it. The inflation measure, the core personal consumption expenditure price index, advanced to a 4.9% annual rate in August from 4.7% in July, surpassing the Street’s consensus view for a 4.8% reading.
  • All but one of the S&P 500’s sectors participated in the weekly drop. Utilities had the biggest percentage decline, falling 8.8%, followed by a 4.2% drop in technology, a 4% slip in consumer staples, and a 3.9% decrease in real estate.
  • Energy was the lone sector in positive territory for the week with a 1.8% increase.
  • The decliners in the utilities sector included Duke Energy (DUK), whose shares slid 10% as the electric and natural gas company said Hurricane Ian cut power to many of its Florida customers. While the company said more than 650,000 customers have had power restored thus far, it also noted about 430,000 customers were still without power as of midday Friday, with outages spread throughout its territory.
  • The technology sector was weighed down by shares of Apple (AAPL), which declined 8.1% on the week as BofA Securities Thursday downgraded its investment rating on the consumer technology company’s stock to neutral from buy amid expectations for consumer spending to slow.
  • In consumer staples, shares of Walgreens Boots Alliance (WBA) shed 4.4% as fellow pharmacy retailer Rite Aid (RAD) reported a wider-than-expected fiscal Q2 loss and said it expects consumer spending and supply chain challenges to persist through the second half of the year.
  • On the upside, the energy sector’s climb came despite weekly declines in crude oil and natural gas futures. The sector’s gainers included shares of Occidental Petroleum (OXY), which rose 4.6% as Berkshire Hathaway (BRK.A, BRK.B) said it added about six million of the company’s shares.
  • Next week, October will kick off with data on September manufacturing and services as well as August construction spending and factory orders in the first few days of the week, but September jobs data due Friday will receive the most attention.
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