Market Volatility Continues as S&P 500 Enters Correction Territory

The S&P 500 recently experienced a significant decline, entering correction territory. Throughout the week, all three major averages recorded steep losses, with the Dow and S&P 500 down 2.1% and 2.5% respectively, and the Nasdaq falling 2.6%. This downward trend was primarily driven by sharp declines in key tech stocks such as Meta Platforms and Google-parent company Alphabet. This week also witnessed the worst trading day for the Nasdaq since February. The market’s reaction to disappointing earnings and a shaky economic outlook played a significant role in these losses.

As tech stocks experienced a notable decline, the Nasdaq fell more than 10% from its closing high in July, entering correction territory. The question on everyone’s mind is how much further the US economy will slow down and at what pace. While the third-quarter GDP print showed an extraordinarily high figure, market participants remain cautious. Dave Sekera, Chief U.S. Market Strategist at Morningstar, acknowledges that the economic outlook is still fragile. The uncertainty surrounding future economic growth contributes to the volatility in the market.

Several companies faced significant losses due to disappointing earnings reports. Ford’s stock dropped 14% during the week after the company missed third-quarter expectations and withdrew its guidance for the year. This downward trend was primarily due to the ongoing UAW strike. Additionally, Chevron shares fell by 13% after reporting earnings. These negative earnings reports have further pressured the overall market this week, contributing to the decline in major averages.

Traders are keeping a close eye on new inflation data as it has the potential to impact future market movements. The core personal consumption expenditures (PCE) reading for September was released, coinciding with the upcoming Federal Open Market Committee meeting. The core PCE increased by 0.3% last month and 3.7% year over year, aligning with economists’ estimates. However, consumer spending surpassed expectations with an increase of 0.7%. The PCE serves as the Federal Reserve’s preferred inflation gauge, and market participants are closely monitoring these figures as they anticipate the Fed’s decision on future monetary policy.

The recent market decline and entry into correction territory underscore the prevailing uncertainty surrounding the US economy. Investors are closely monitoring the economic outlook, cautious of potential slowdowns. Disappointing earnings reports from major companies have further weakened market sentiment. Inflation data adds another layer of uncertainty, as market participants await the outcome of the Federal Open Market Committee meeting. As the market remains volatile, investors continue to navigate these uncertain times, making well-informed decisions amidst ongoing developments.

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