NEW YORK, RAW – Wall Street has lost ground as economic uncertainties and the increasing likelihood of a US corporate tax rate hike dampened investor sentiment and prompted a broad sell-off despite signs of easing inflation.
Optimism faded throughout the session, reversing an initial rally following the Labor Department’s consumer price index report.
All three major US stock indexes ended in negative territory in a reminder that September is a historically rough month for stocks.
So far this month the S&P 500 is down nearly 1.8 per cent even as the benchmark index has gained more than 18 per cent since the beginning of the year.
“There is a possibility that the market is simply ready to go through an overdue correction,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
“From a seasonality perspective, September tends to be the window dressing period for fund managers.”
The advent of the highly contagious Delta COVID-19 variant has driven an increase in bearish sentiment regarding the recovery from the global health crisis, and many now expect a substantial correction in stock markets by the end of the year.
“We’re still in a corrective mode that people have been calling for months,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
“Economic data points have been missing estimates, and that has coincided with the rise in the Delta variant.”
The CPI report delivered a lower-than-consensus August reading, a deceleration that supports Federal Reserve Chairman Jerome Powell’s assertion that spiking inflation is transitory and calms market fears that the US central bank will begin tightening monetary policy sooner than expected.
US Treasury yields dropped on the data, which pressured financial stocks, and investor favour pivoted back to growth at the expense of value.
The long expected corporate tax hikes, to 26.5 per cent from 21 per cent if Democrats prevail, are coming nearer to fruition with US President Joe Biden’s $US3.5 trillion ($A4.8 trillion) budget package inching closer to passage.
The Dow Jones Industrial Average fell 292.06 points, or 0.84 per cent, to 34,577.57; the S&P 500 lost 25.68 points, or 0.57 per cent, at 4,443.05; and the Nasdaq Composite dropped 67.82 points, or 0.45 per cent, to 15,037.76.
All 11 major sectors in the S&P 500 ended the session red, with energy and financials suffering the largest percentage drops.
Apple Inc unveiled its iPhone 13 and added new features to its iPad and Apple Watch gadgets in its biggest product launch event of the year as the company faces increased scrutiny in the courts over its business practices.
Its shares closed down 1.0 per cent and were the heaviest drag on the S&P 500 and the Nasdaq.
Intuit Inc gained 1.9 per cent following the TurboTax maker’s announcement that it would acquire digital marketing company Mailchimp for $US12 billion.
CureVac slid 8.0 per cent after the German biotechnology company cancelled manufacturing deals for its experimental COVID-19 vaccine.
Declining issues outnumbered advancing ones on the NYSE by a 2.25-to-1 ratio; on Nasdaq, a 2.40-to-1 ratio favoured decliners.
The S&P 500 posted two new 52-week highs and two new lows; the Nasdaq Composite recorded 50 new highs and 107 new lows.
Volume on US exchanges was 10.07 billion shares, compared with the 9.38 billion average over the last 20 trading days.