U.S. stocks fell Friday, closing out a losing week, month and quarter as investors wrestled with more signs of persistently high inflation.

Major indexes have sustained deep losses this year as the Federal Reserve raises interest rates in an attempt to tame rising prices. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite on Friday all recorded their worst first nine months of a calendar year since 2002, according to Dow Jones Market Data.

Stocks had rallied for two months beginning in June as investors hoped that inflation would cool and the Fed would pull back on its aggressive rate increases. But price pressures have remained stubbornly high, and Fed officials made clear that the monetary tightening would continue. Last week, the central bank unveiled another supersize rate increase and signaled that additional large rate raises were likely.

The final week of the quarter saw stocks reach new lows in volatile trading. The Dow Jones Industrial Average on Monday fell into a bear market, a decline of 20% or more from a recent high.

Wednesday brought some relief, but only briefly. Government bond yields dropped after the Bank of England intervened to calm debt markets disturbed by a tax-cut plan, making stocks more attractive to many money managers. But shares tumbled again on Thursday.

On Friday, major indexes locked in their quarterly losses with another down day. The S&P 500 fell 54.85 points, or 1.5%, to 3585.62. The Dow Jones Industrial Average dropped 500.10 points, or 1.7%, to 28725.51. The Nasdaq Composite declined 161.89 points, or 1.5%, to 10575.62.

All three indexes ended at their lowest closing levels since 2020. The Dow Jones Industrial Average is down 21% in 2022, the S&P 500 is off 25% and the tech-heavy Nasdaq Composite has slumped 32%.

With the central bank signaling it is committed to bring inflation under control, investors have grown fearful that its campaign of rate increases will meaningfully slow the economy.

“In the trade-off between growth and inflation, the Fed is going to choose inflation,” said Desmond Lawrence, senior investment strategist at State Street Global Advisors. “That’s what’s really giving you the choppiness that we’ve had in the past week in particular.”

All three indexes fell for a third consecutive quarter. For the S&P 500 and Nasdaq, it was the longest quarterly losing streak since streaks ending in March 2009, according to Dow Jones Market Data.

The final day of the quarter brought more evidence of the price pressures that the Fed is trying to contain. A measure of inflation that excludes volatile food and energy costs rose to a 4.9% year-over-year increase from 4.7% the prior month, according to the Commerce Department. A month-over-month reading also increased.

“It’s really just another indication that inflation is still broadening,” said Eric Diton, president and managing director at The Wealth Alliance. “For anyone who’s watching the Fed, it’s ammunition for the Fed to keep hiking rates, which is certainly bearish for stocks and bonds.”

Government bond yields continued their march higher. The yield on the benchmark 10-year U.S. Treasury note has risen this year to 3.802%, from 1.496% on Dec. 31. It ticked up Friday from 3.747% on Thursday.

Yields rise as bond prices fall, leaving investment portfolios battered this year by the dual drawdowns in stocks and bonds.

“It’s not so much that we don’t get bear markets in stocks,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. “What’s made it extraordinary is that there’s been no place to hide.”

Among individual stocks, Nike shares tumbled $12.21, or 13%, to $83.12 after the sneaker giant said inventories jumped 44%, while higher discounts and freight costs squeezed profit margins.

New data showed the eurozone’s annual rate of inflation hit 10% in September as Russian action to curtail the bloc’s gas supply drove energy prices higher.

European shares mostly rose, with the Stoxx Europe 600 index adding 1.3% for the day.

Brent crude, the global oil benchmark, edged down 0.6% Friday to $87.96 per barrel. Brent prices lost 23% for the quarter but are still up 13% in 2022.

Stock markets in the Asia-Pacific region mostly fell. Benchmark indexes in Australia, Japan, South Korea and mainland China dropped between 0.6% and 1.8%, while Hong Kong’s Hang Seng Index added 0.3%.

source :- WSJ