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Wall Street sets course for monthly losses, worst quarter since COVID outbreak

Wall Street oscillated on Thursday, as investors spent the last day of a quarter fraught with concerns over the Delta COVID variant and inflation fears, watching the ongoing efforts in Washington to fund the government and avert a shutdown.


The S&P 500 and the Dow were in negative territory, with the blue-chip Dow off about 1%, while the tech-laden Nasdaq was higher on the day.


Losses pared by mid-afternoon on news that the Senate approved a stopgap spending bill to keep the U.S. government running.


All three major U.S. stock indexes are on track to show their worst quarterly performance since the opening months of 2020, when the COVID-19 pandemic brought the global economy to its knees.


The S&P and Nasdaq are set to show modest gains over the July-to-September period, while the Dow appears to be headed for a nominal quarterly loss.


For the month, all three indexes are on course to post their worst quarterly losses since last year’s September-October period, which is historically the weakest and most volatile time of the year for the stock market.


The tug-of-war between growth and value persisted throughout the month and quarter. The S&P growth index having plunged about 5% in September is nevertheless on course to post a quarterly gain of more than 2%, while value has shed nearly 3% this month but is down nearly 1% for the July-to-September period.


“There has certainly been a sea change especially this month, as a couple of events have occurred,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.


“The rise in interest rates has caused a rotation out of growth stocks, which is tied to the increase in inflation expectations, and indeed the Fed at their last meeting increased their near-term expectations for inflation,” Ghriskey added.


On a more granular, sector level, the FAANG group of momentum stocks is set to show a monthly drop of about 4% and a quarterly decline of over 3%.


Additionally, transportation stocks, widely seen as a barometer of economic health, are on track to post a monthly loss of over 3% and a quarterly slide of about 5%.


On the economic front, initial jobless claims unexpectedly edged higher for the third straight week. Market participants now look to consumer spending, inflation and factory activity data expected on Friday for signs of economic health and clues regarding the U.S. Federal Reserve’s shifting timeline for tapering its asset purchases and hiking key interest rates.


Fed Chairman Jerome Powell, along with Treasury Secretary Janet Yellen, testified before the U.S. House Committee on Financial Services, even as wrangling continued on Capitol Hill over funding the government in the face of a looming deadline and the threat of potential shutdowns and credit default.

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