S&P500 Barely Positive in Third Quarter, Dollar at One-Year High

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Principal Points:

• The S&P500 suffered its worst month since March 2020, barely turned positive for third quarter
• The US dollar advanced to a one-year high as a potential rise in interest rates boosted its value

Stocks in the US Finish Their Worst Month Since March 2020

The US stock market was far from finishing the third quarter with a bang. Instead, the major benchmark indexes barely made it into positive territory. Moreover, losses accumulated in September nearly sank the S&P500 for the third quarter.

In other words, the $51tn US stock market notched its smallest quarterly gain since the pandemic arrived in March last year. The blue-chip broad-based S&P500 added just 0.2% for the quarter ended September. The minor advance was an unusual result for investors who were seeing elevated returns since Covid-19 knocked the financial markets.

For September alone, the S&P500 was down more than 4%. On that note, September marked the worst monthly performance for the broad stock gauge since March 2020.

In addition, the other two major averages slipped into the red in the third quarter. The 30-stock Dow Jones Industrial Average lost 1.9% for the period. Moreover, the Nasdaq Composite fell 0.3% July through September. The tech-heavy stock average tumbled 5.3% in September, while the Dow erased 4.3% for the period.

Markets Looking Gloomy as the Fourth Quarter Sets In

Looking ahead into the final quarter, investors now fear the main drivers for the stellar rally may have been exhausted.

Since the pandemic hit, the US Federal Reserve has been ploughing as much as $120bn in monthly asset purchases. To this end, their goal was to provide stability in the US economy by adding new jobs and helping businesses carry on. Furthermore, the extraordinary monetary stimulus also supported the run to new highs for stocks.

At the Fed’s last meeting near the end of September, Chairman Jerome Powell spoke on tapering. He announced the US central bank is planning to unwind the asset purchase program as early as November. In other words, the monthly bond-buying would be reduced. That being said, the long-running sprint would not be supported by the same amount of cash.

US Dollar Jumps to a One-Year High Against Major Currencies

In the meantime, the US dollar rallied to a one-year high against major peers in the forex market. The dollar index, which tracks the performance of the US dollar against six currencies, touched its highest level since Sep. 28 2020.

The greenback rose in an environment defined by a surge in consumer prices. Furthermore, inflation in the US reached a 13-year peak after the world’s largest economy reopened. In addition, the expected reversal of the Fed’s easy-money policies has prompted traders and investors to flock to the greenback.

Bitcoin and cryptocurrencies, similarly to stocks on Wall Street, finished the month with a loss, but ended up in the green for the quarter. The original cryptocurrency pushed higher by more than 30% in the September quarter. Over the last month, however, the price of bitcoin retreated by about 6%.