Stimulus and pandemic uncertainties caused a pullback in markets in September, but the stock market still managed to close the third quarter higher. The technology sector was the primary contributor to the S&P 500 Index, which was up 8.93% for the third quarter. Consumer discretionary and industrial stocks also performed well during the quarter, keeping hopes alive for an economic recovery.
Following an upward surge during this summer, September witnessed a tapering of equity momentum, leading to lower valuations. The three major equity indices, Dow Jones Industrial, S&P 500 Index, and the Nasdaq went negative in September, but positive for the third quarter overall ending September 30th.
The Federal Reserve continued its purchase program of $120 billion of Treasury and mortgage agency bonds each month, expanding its balance sheet to over $7 trillion as of the end of September. The monumental buying is meant to facilitate bond market activity while maintaining a relatively low-rate environment.
Yields on government and corporate bonds vacillated in September as uncertainty surrounding additional stimulus efforts influenced rates. Analysts and economists expect higher long-term rates to result from the incremental debt issuance to pay for the next stimulus package.
Sources: S&P, Bloomberg, Dow Jones, Nasdaq, U.S. Treasury, Bloomberg