S&P 500 Closes Out The Third Quarter At New Lows: Can It Bounce Back?

Zinger Key Points
  • Core PCE was up 4.9% in August, exceeding economist estimates of a 4.6% rise.
  • Bank of America's downgrade of Apple stock from "Buy" to "Neutral" on Thursday triggers a sharp sell-off in tech stocks.

The S&P 500 closed out a brutal third quarter on a low note this week, hitting new 52-week lows.

On Friday, the Bureau of Economic Analysis reported the personal consumption expenditures (PCE) price index gained 6.2% year-over-year in the month of August, down from a 6.3% PCE inflation in July. Core PCE, which excludes volatile food and energy prices and is the preferred inflation measure for the Federal Reserve, was up 4.9% in August, exceeding economist estimates of a 4.6% rise.

The British pound dropped to new all-time lows against the U.S. dollar on Monday in response to new U.K. Prime Minister Liz Truss' bold new economic stimulus plan that included aggressive tax cuts and investment incentives. To stabilize the bond and currency markets, the Bank of England announced on Wednesday that it will suspend its planned bond selling program and will instead begin buying long-dated U.K. government bonds.

Concerns over economic instability in the U.K. sent 10-Year U.S. Treasury yields above 4% in midweek trading before they retreated to 3.73% to finish the week. The S&P 500 also hit a new 52-week low of 3,610.40 on Thursday, its lowest intraday level since 2020.

See Also: 'Big Short' Investor Michael Burry Reminisces Dow's Largest Single-Day Fall In 2008: Wonders 'If This Could Be Worse'

Bank of America downgraded Apple AAPL from "Buy" to "Neutral" on Thursday, triggering a sharp sell-off in tech stocks. In the downgrade note, BofA analyst Wamsi Mohan said he expects "weaker consumer demand" will prompt analysts to cut their Apple earnings estimates in coming quarters.

Not Rite Now: Rite Aid Corporation RAD shares traded lower by more than 29% on Thursday after the pharmacy retailer reported a larger-than-expected second-quarter net loss and cut its full-year earnings guidance.

Investors will get more quarterly earnings reports in the week ahead from Lamb Weston Holdings Inc LW on Wednesday, Conagra Brands Inc CAG and Levi Strauss & Co LEVI on Thursday and Tilray Inc TLRY on Friday.

Wall Street analysts currently project an average of 25.7% upside for the S&P 500 over the next 12 months, according to FactSet.

Economic Numbers: Following the disappointing PCE reading, investors will get more key economic updates on Thursday when Eurostat releases its August Retail Sales report and on Friday when the U.S. Labor Department releases its September jobs report.

Photo: Zenzen via Shutterstock

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