Market Update
The positive momentum of the first two quarters of the year did not carry over to the third quarter. Inflation continued to prove stubborn throughout the third quarter, moderating somewhat, but not enough to curb the Federal Reserve's hawkish monetary policy. Crude oil and gasoline prices soared during the summer. Job gains, while steady, declined throughout the third quarter. The housing sector slowed on rising mortgage rates and dwindling inventory. The third quarter saw most of the market sectors decline from the second quarter. Utilities, real estate, information technology, consumer staples, and consumer discretionary fell the furthest, while energy rose by more than 16.0%.
On the last day of the third quarter, each of the benchmark indexes lost value compared to their second quarter performances. The small caps of the Russell 2000, sensitive to current economic changes, fell the furthest, followed by the Nasdaq, the S&P 500, the Global Dow, and the Dow. Rising interest rates have impacted bond prices, yields, and the U.S. dollar. Ten-year Government bond yields rose in the third quarter, reaching the highest level since 2007, as long-term bond prices slid lower. The U.S. dollar also rose in the third quarter, hitting its highest level since last November. With rising bond yields, foreign investors buy dollars to buy bonds, which helps contribute to the increasing dollar. The increase in the Federal Funds rate pushed mortgage rates to 7.31% on the benchmark 30-year home loan, the highest rate in 23 years. However, unlike 2000, house prices are generally rising alongside mortgage rates, as demand has outpaced available inventory. Oil prices, near $91.00 per barrel, rose nearly 30.0% since June, as Saudi Arabia and Russia, the world's second and third largest oil exporters, extended voluntary restrictions on their production. The retail price for regular gasoline was $3.837 per gallon on September 25, $0.024 above the August 28 price and $0.027 higher than the price on June 26. Regular retail gas prices increased $0.126 from a year ago. Gold prices declined in the third quarter, nearing a seven-month low.
September continued the bear run for stocks. Each of the benchmark indexes listed here fell between 3.0% and more than 6.0%. Inflationary pressures showed signs of cooling, with core prices for the PCE price index and the CPI decreasing for the 12-months ended in August. The Federal Reserve elected not to increase interest rates in June, opting, instead, to step back and assess additional information and its implications for monetary policy. Gross domestic product advanced at an annualized rate of 2.1%, according to the third and final estimate. Crude oil prices continued to increase as did the yield on 10-year Treasuries. Gold prices declined more than 5.0%.
It appeared that the start of the fourth quarter might be marred by a government shutdown. However, U.S. lawmakers reached a short-term resolution right before the October 1 deadline. October will begin with autoworkers on strike and student loan payments resuming after a pandemic-related pause. Otherwise, investors will continue to focus on inflation data and the Federal Reserve's response during the last three months of the year. Concerns over slowing economic activity, both here and globally, also will influence the market going forward.
Market update provided by Broadridge Investor Communications Solutions, Inc.
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