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Stocks Slide in Final Week of the 3rd Quarter, but Jump on First Day of the Fourth Quarter

Weekly Update – October 01, 2021

  • The S&P 500 index fell 2.2% last week as losses logged in the final days of Q3 amid worries about inflation and supply chain issues outweighed a positive start to Q4 on Friday as data showed August consumer spending rose more than expected.
  • The index ended the week at 4,357.04, down from last Friday’s closing level of 4,455.48. The weekly decline would have been sharper if not for a 1.2% Friday jump as the market kicked off the new month and quarter on a positive note.
  • The S&P 500 posted a 4.8% drop for the month of September, marking its first monthly drop since this January and its largest monthly decline since March 2020, when the pandemic began prompting shutdowns. Still, the index edged up 0.2% in Q3 as gains in the first two months of the quarter helped narrowly outweigh the September slump. It is now up 16% for the year to date.
  • The week’s decline came as investors exerted caution into the end of the quarter amid concerns about inflation, supply chain disruptions and continued pandemic impacts on economic growth. Adding to the worries, the Federal Reserve’s Federal Open Market Committee indicated last week that it may begin reducing bond buying as soon as November and could start raising rates next year. Concerns about China’s economy have also weighed on sentiment and added to uncertainty.
  • However, despite rising prices, data released Friday showed consumer spending rose by 0.8% in August, better than expectations for a 0.6% rise and marking a strong improvement from July’s 0.1% slip. Investors were encouraged by the better-than-expected consumer spending data, especially heading into the holiday shopping season.
  • Nevertheless, the weekly slide was broad, with all but one sector declining. The health care sector had the largest tumble, down 3.5%, followed by a 3.3% drop in technology. Among other hard-hit sectors, consumer staples, consumer discretionary and real estate logged declines of more than 2% each. Energy was the lone sector in the black, up 5.8% for the week.
  • The technology sector’s decliners included NXP Semiconductors (NXPI), whose shares fell 11% on the week as Bernstein downgraded its investment rating on the connectivity technology company’s stock to market perform from outperform. The firm also reduced its price target on NXP’s stock to $230 from $245.
  • In health care, shares of Moderna (MRNA), the maker of one of the approved COVID-19 vaccines, shed 21% last week. The drop came even as the biotechnology company unveiled plans to create a new science center in Cambridge, Massachusetts to support the company’s growth and drug discovery efforts. A phased move-in is expected in 2023.
  • On the upside, the energy sector’s gainers included Cabot Oil & Gas (COG), whose shares jumped 9.4% as its shareholders and shareholders of Cimarex Energy (XEC) voted in favor of Cabot’s acquisition of Cimarex, which was expected to close Friday. Wolfe Research upgraded its investment rating on Cabot’s shares to outperform from peer perform while raising its price target on the stock to $28 per share from $25.
  • In economic data next week, the first full week of October and Q4, all eyes will be on employment data for the just-ended month. Private-sector September jobs data will be released Wednesday by ADP, followed by the Labor Department’s weekly jobless claims on Thursday and US nonfarm payrolls and the US unemployment rate for September on Friday.
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