Stocks fell for a third straight week as investors gauged the health of the U.S. economy and its impact on future monetary policy. The S&P 500 Index climbed on September 30 after the U.S. administration denied claims that the United States is exploring plans to limit U.S. investors’ portfolio flows into China. Then, the S&P 500 kicked off the fourth quarter with a 3% slide over two days, spurred by pessimism after an Institute for Supply Management (ISM) report (released Monday) showed manufacturing activity fell to a 10-year low in September. Tepid data flow continued into Thursday, when a separate ISM report showed services activity declined to a three-year low. The S&P 500 extended its drop Thursday, then rebounded midday as investors speculated weak data could force the Federal Reserve (Fed) to cut interest rates again later this month. The S&P 500 closed the week on an upswing after a mixed September jobs report.
Global stocks declined during the week. European stocks slid the most since August as the deadline for the United Kingdom’s exit from the European Union neared. Emerging markets shares dropped for a third straight week.
Growth stocks led returns during the week, rebounding after a rough end to September. The Nasdaq Composite Index outperformed the four major indexes we track, while the Russell 2000 Index of small cap stocks underperformed the other benchmarks. Technology and healthcare shares were the best-performing sectors, while financial and energy shares lagged for the week.
Fixed income markets gained for the third consecutive week, pushing the 10-year U.S. Treasury yield down to 1.5%. The yield curve steepened as short-term yields fell faster than long-term yields, with the 2-year yield reaching its lowest level since September 2017. High-quality debt outperformed amid the market volatility. High-yield corporate spreads widened the most since December 2018, while investment-grade corporate spreads increased the most since August.
Oil prices continued to decline, fully erasing gains seen after the attack on Saudi Arabia’s oil facilities and sliding to their lowest level since early August. The U.S. dollar declined on the week, but not before the euro/dollar pair fell to multi-year lows. Gold prices declined 1.6% on Monday but caught a flight-to-safety bid and ultimately finished the week higher.
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