Inflation Fears, Funding Stalemate Cap Off September Slide

The Dow logged two 500+ single-session drops this week

Assistant Editor
Oct 1, 2021 at 3:01 PM
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If you're an investor, you're probably sick of the words 'September seasonality' by now. As the historically bearish period came to a close and ushered in a new month, all eyes were on Congress and the U.S. Federal Reserve. To start the week, the 10-year Treasury yield soared to its highest level since June, and the Dow Jones Industrial Average (DJI) scored its fourth-straight win. But the budget stalemate in Congress loomed overhead, after Republicans blocked a bill on Monday which would have injected funding into the government until December and suspended the debt ceiling until the end of 2022. In lieu of this, as well as tech's bond yield-fueled sell-off, the Dow dropped 569 points on Tuesday, while the tech-heavy Nasdaq Composite (IXIC) logged its worst day since March.

Government funding remained in focus Wednesday, with Treasury Secretary Janet Yellen stating that Congress has until Oct. 18 to raise or suspend the U.S. debt ceiling. Plus, U.S. Federal Reserve Chairman Jerome Powell told the European Central Bank (ECB) that inflation may hold up for longer than previously estimated, due to bottlenecks and supply issues potentially lasting into 2022.

To wrap up the month, Thursday began with worse-than-expected initial weekly jobless claims. By the end of the day, the Dow plummeted 546 points to close out its worst monthly loss since October of 2020, while the Nasdaq tallied its worst month since March of 2020. The S&P 500 Index (SPX) finished the month lower as well, though snagging its sixth-straight quarterly win. At last glance on Friday, it appears all three major indexes are headed for weekly losses, as investors unpack some new economic data

Electric Vehicle Names Take the Stage

Earlier this month, Schaeffer's Investment Research's Senior Market Strategist Matthew Timpane was a featured presenter at the Benzinga Electric Vehicles Conference. You can view the entirety of his presentation here. This week, since Timpane's slot was so well received, we wanted to further highlight the EV stocks he discussed. First, The Global X Autonomous & Electric Vehicles ETF (DRIV) is well diversified for long term exposure to the AV industry, including major auto companies, semiconductors, battery and fuel cell power, plus material and other component providers. Another one of the stock's mentioned, Lucid Group (LCID), surged on Wednesday after the luxury electric vehicle maker started production on its Lucid Air cars at its Arizona factory. Global X Lithium & Battery Tech ETF (LIT) is one to watch as well, and has been doing very well this year so far. In other news, Ford (F) stock popped on an $11 billion investment, which is being made alongside South Korean partner SK Innovation, to accelerate its push into electric vehicles. Plus, Toyota Motor (TM), which has been noted for its EV efforts lately, hit a record high early this week after 25.8 million share buyback. 

Pharma Stocks Making Moves

Plenty of pharmaceutical names made headlines this week. Sanofi SA (SNY)  and AstraZeneca (AZN) both provided updates in regard to their respective Covid-19 vaccines. Elsewhere, the U.S. Food and Drug Administration (FDA) approved AbbVie's (ABBV) migraine prevention treatmentOn the more technical side of things, Eli Lilly (LLY) stock pulled back to a historically bullish trendline, while Perrigo Company PLC (PRGO) hit an annual high after surpassing a key trendline. 

A New Quarter Begins

Though next week is relatively quiet in terms of earnings, Conagra (CAG), Constellation Brands (STX), Levi Strauss (LEVI), and PepsiCo (PEP) are still slated to release their quarterly reports, and October will kick off with plenty of economic data. Also, speculate on whether or not the S&P 500 can make a comeback in the fourth quarter, with Schaeffer's Senior Quantitative Analyst Rocky White. 

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