Stocks move lower as S&P 500 heads for a big September loss

Stocks moved broadly lower on Wall Street Thursday as the major indexes headed for steep monthly losses.

The S&P 500 fell 0.8% as of 12:58 p.m. Eastern. The Dow Jones Industrial Average fell 452 points, or 1.3%, to 33,937 and the Nasdaq fell 0.2%.

Banks and a mix of companies that provide consumer goods and services posted some of the biggest losses. Nearly 80% of stocks in the benchmark S&P 500 fell.

Investors have had their eyes on Washington, where Democrats and Republicans in Congress have been wrestling over extending the nation’s debt limit. Congress has moved to avert a crisis, and the Senate is poised to approve legislation to fund the federal government into early December.

The broader market has stumbled through September as investors try to get a clearer picture of the economy’s path amid inflation concerns and uncertainty about how COVID-19 will continue to impact industries and consumers.

The benchmark S&P 500 is down 4.4% in September and is headed for its worst monthly loss since March 2020. The index is still on track to eke out a 0.6% gain this quarter, but that would be its smallest quarterly gain since the pandemic stunned the economy and financial markets.

“It’s not really surprising that we’re seeing a weaker September because historically its the worst month on average,” said Jay Pestrichelli, CEO, of investment firm ZEGA Financial. “Unfortunately, there’s not a lot of information to glean for October from it.”

Investors have been weighing worrisome economic data that revealed that the highly contagious delta variant crimped consumer spending and the job market’s recovery.

The weak signals for economic growth continued Thursday as the Labor Department reported that unemployment applications rose for the third straight week and were higher than economists anticipated. The Commerce Department upgraded its estimate of economic growth during the second quarter to 6.7%, which was slightly better than economists expected, but they expect growth to slow to 5.5% during the third quarter.

Inflation concerns that had been weighing on the market earlier in the year returned in September as a wide range of companies issued more warnings about the impact of rising prices on their finances. Sherwin-Williams and Nike are among the many companies that have warned investors about supply chain problems, higher raw material costs and labor issues.

Inflation will likely remain the key concern hanging over the markets for the rest of the year, Pestrichelli said, and it could put the Federal Reserve in the tough position of having to raise rates earlier than anticipated.

Investors are still trying to gauge whether those issues are temporary and part of the economic recovery or could linger longer than expected. The upcoming round of corporate earnings reports could shed light on how companies are dealing with those problems.

“The jury is still out on this and we don’t really know if it's demand-driven or supply-driven inflation,” Pestrichelli said. “If you end up getting lower growth and higher inflation, then you get stagflation and that's no good for the market.”

Bond yields edged lower. The yield on the 10-year Treasury note, a benchmark for many kinds of loans, fell to 1.51% from 1.54% from late Wednesday. It was as low as 1.32% just over a week ago.

Several companies made outsized gains and losses following corporate news on Thursday. Virgin Galactic's stock soared 11.5% after it was cleared to fly again following a Federal Aviation Administration inquiry. CarMax slumped 10.9% after reporting disappointing fiscal second-quarter profits.