Dow drops 500 points after plunging 8% in September

Wall Street ended Friday — the last day of the month and quarter — on another downside note, with major stock indices posting their third consecutive quarterly loss for the first time since the Great Recession.

The Dow Jones Industrial Average fell 500 points for a loss of 1.7 percent on the day, down 8.8 percent for September, 6.6 percent for the quarter and 21 percent since the start of the year.

The market’s dismal recent performance follows historically high inflation, rapidly rising interest rates and fears that the economy could soon plunge into a sharp downturn with massive layoffs and rising unemployment.

In the first nine months of 2022, Wall Street suffered three consecutive quarterly declines, the longest losing streak for the S&P 500 and Nasdaq since 2008 and the Dow’s longest quarterly decline in seven years.

A trader operates on the NYSE trading floor on Thursday, as Dow Jones shares close another 500 points lower on Friday

The S&P 500 fell 1.5 percent on Friday to its lowest level in nearly two years. The Nasdaq also fell 1.5 percent after losing 10.5 percent in September.

“It’s another ugly day to close out an ugly quarter in what seems like a very ugly year,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska.

“Investors will look back and realize that this was the year when the Fed took a total of 180 percent decline in their views on inflation and quickly became incredibly aggressive.”

The Federal Reserve has turned the markets upside down by containing its most brutal series of rate hikes in decades to curb stubbornly high inflation, leaving many market participants eyeing key economic data for signs of an impending recession.

“The realization that the Fed is doing everything it can to combat 40 years of high inflation has investors worried that they will push the economy over the edge and into recession,” Detrick added.

The Dow has lost 21 percent since the start of the year and is down three quarters in a row

The Commerce Department’s Personal Consumer Expenditure (PCE) report did not allay these fears.

It showed that as consumers continue to spend, the prices they pay continue to rise and drift beyond the Fed’s inflation target.

The new data pretty much means the central bank’s aggressive monetary policy will last longer than investors had hoped.

Fears of a recession also echoed in dire warnings from Nike Inc and cruise operator Carnival Corp, both of which point to inflation-related margin pressures.

Corporate earnings reports for the quarter ending Friday’s closing bell will begin to land in a few weeks, and analyst expectations are trending downward.

Analysts are now seeing the S&P 500’s annual earnings growth of 4.5 percent, down from the estimate of 11.1 percent when the quarter began.

Fund reallocations at the end of the quarter and window dressing likely contributed to the session’s volatility.