U.S. stocks began the week deeply in the red as investors continued to flock to the sidelines in September amid several emerging risks for the market.
The S&P 500 fell 1.7% to 4,357.73, posting its worst daily performance since May 12. It was a broad sell-off with each of the main 11 sectors of the benchmark registering losses. The Dow Jones Industrial average lost 614.41 points, or 1.8%, to 33,970.47 for its biggest one day drop since July 19. The tech-heavy Nasdaq Composite dropped 2.2% to 14,713.90.
One optimistic sign from Monday’s rout: The Dow closed well off its session low. The 30-stock average was down 971 points at it low for the day.
There were a number of reasons for the sell-off:
- Investors fear a contagion sweeping financial markets from the troubled China property market. Hong Kong equities saw a big sell-off during the Asia trading session on Monday. The benchmark Hang Seng index plunged 4% with embattled developer China Evergrande Group on the brink of default.
- The Federal Reserve begins a two-day meeting Tuesday and investors are worried the central bank will signal it’s ready to start pulling away monetary stimulus amid surging inflation and improvement in the job market.
- Covid cases because of the delta variant remain at January levels as colder weather approaches in North America.
- September has the worst track record of any month, averaging a 0.4% decline, according to the Stock Trader’s Almanac. History shows the selling tends to pick up in the back half of the month.
- Investors are also concerned about brinkmanship in DC as the deadline to raise the debt ceiling approaches. Congress returned to Washington from recess rushing to pass funding bills to avoid a government shutdown.
Monday’s sell-off briefly pushed the S&P 500 5% below its last record on an intraday basis. It’s been a long time since the market has faced a sell-off of this magnitude as investors continued to buy the dip with fiscal and monetary stimulus backstopping the markets. The index closed the session 4.1% below its record high from Sept. 2.
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