"S&P 500\u2019s fourth week of losses sounds alarm on economic growth"

" \n The September stock-market selloff that started as comeuppance for overheated tech shares evolved this week into a more troubling sign for the U.S. economy. \n \n\n \n While stocks advanced Friday after lawmakers revived hopes for a fresh spending bill, the S&P 500 notched a fourth straight weekly drop. This time, it wasn\u2019t Apple or Tesla that bore the brunt of selling. \n \n\n \n Companies with profits most closely tied to economic growth, like commodity producers and banks, led the drop. The recovery trade faltered, with airlines sinking the most since June and small-caps dipping below their average price for the past 200 days. \n \n\n \n The shift upended the market narrative that September\u2019s slide was a cleansing pullback after August\u2019s rally stretched valuations to levels not seen in 20 years. \n \n\n \n Investors who ignored the curtailment of federal stimulus this summer suddenly grew\u00a0 concerned \u00a0the economy would falter without another boost, endangering the rebound in corporate profits. Virus trends\u00a0 worsened , and election jitters\u00a0 weighed \u00a0on sentiment. \n \n\n \n \u201cYou are shifting some of the concerns away from just a valuation perspective and taking into account some of the other items that we knew were looming in the background,\u201d said Wayne Wicker, chief investment officer of Vantagepoint Investment Advisers. \u201cThere are some real uncertainties weighing on the markets.\u201d \n \n\n \n \n \n\n \n The week\u2019s volatility brought the concerns over the economy into relief. The S&P 500 lost 2.4% Wednesday after Federal Reserve officials\u00a0 warned \u00a0a new spending bill was needed to fuel the recovery. \n \n\n \n Prospects for stimulus had dimmed at the start of the week when Congress turned its attention to filling the Supreme Court vacancy, prompting economists at JPMorgan Chase & Co. and Goldman Sachs Group Inc. to\u00a0 cut\u00a0 their growth forecasts. \n \n\n \n When the S&P 500\u2019s rout midweek took it 10% below its Sept. 2 record, putting the month\u2019s damage at $2 trillion in valuation, lawmakers resuscitated stimulus talks. Stocks rebounded late Thursday and rallied Friday after Democrats revised their proposal and Treasury Secretary Steven Mnuchin signaled he\u2019s ready to negotiate anew. \n \n\n \n \u201cAs the stock market moved to correction territory, suddenly they\u2019re like, \u2018Oh geez, we can\u2019t be sitting here doing nothing,\u2019\u201d said Matt Maley, chief market strategist at Miller Tabak + Co. \u201cNow people are starting to point the finger at Congress, and that will lead them to change their tune.\u201d \n \n\n \n Even Friday\u2019s rally revealed growing concern that growth won\u2019t accelerate any time soon. Money flowed back to the safety of the stay-at-home trade. Zoom Video Communications rallied 68%, Peloton jumped 10% and Amazon.com added 2.5%. \n \n\n \n The S&P 500 lost 0.6% over the five days, with eight of its 11 groups retreating. Computer and software makers rallied 2.2% and the Nasdaq 100 rose 2%. Still down 8% this month, the tech-heavy gauge is poised for its worst September since 2008. \n \n\n \n The growth angst showed up in smaller companies that rely on U.S. demand as well. The Russell 2000 tumbled 4%, erasing gains from the previous week, while the Dow Jones Industrial Average dropped 1.8%, joining the S&P 500 in posting a fourth straight weekly decline, the longest losing streak in 13 months. \n \n\n \n \n \n\n \n A Bloomberg basket of stocks that benefit from economic reopenings dropped 5.3% in the week, compared with an advance of 4.1% for those seen gaining an advantage during lockdowns. That\u2019s an about-face from earlier this month, when the recovery trade outperformed. \n \n\n \n \u201cThe prior couple of weeks seemed very much market-positioning led,\u201d said Greg Boutle, U.S. head of equity and derivative strategist at BNP Paribas. \u201cBut this week seemed slightly more of the type of move that you could extrapolate from lower growth expectations.\u201d \n \n\n \n Skepticism is mounting that the market can withstand the double blow of a growth scare and any renewal in a tech selloff. U.S. stock funds bled $25.8 billion in the week through Sept. 23, suffering the third-worst withdrawal on record, according to Bank of America Corp. and EPFR Global data. \n \n\n \n And the September selloff has yet to wash out the euphoric positioning that was partly blamed for the rout. Retail traders, key drivers of the options market during the summer rally, have shown persistence. \n \n\n \n The smallest of traders last week increased their bets on a surge, Options Clearing Corp. data compiled by Sundial Capital Research show. Call open interest remained elevated for high-flying stocks such as Amazon.com and Tesla. \n \n\n \n For months, investors had brushed aside stretched valuations, betting a full economic recovery will allow S&P 500 profits to catch up with a price-earnings ratio that hovered near the highest level since the dot-com bubble. \n \n\n \n While third-quarter income is expected to drop 22% from a year ago, analysts expect corporate America to return to growth in 2021, estimates compiled by\u00a0 Bloomberg Intelligence \u00a0show. \n \n\n \n That rosy outlook is anything but guaranteed, as investors found out this week. While Fed largesse and $3 trillion of federal stimulus helped fuel a torrid five-month rally that began in March, their limitations have become apparent as the virus continues to spread. \n \n\n \n \u201cThere are clear signs the reopening of the economy has stalled,\u201d said Marc Chaikin, founder of Chaikin Analytics. \u201cWe do need another stimulus bill to get the market going on the upside again.\u201d \n \n\n \n But the chances of getting further fiscal stimulus this year look uncertain, with lawmakers focusing on the Supreme Court and a potentially chaotic presidential election coming in November. All that means is that the downside risks are building for the market, according to William Delwiche, an investment strategist at Baird. \n \n\n \n \u201cWhile optimism has begun to retreat, it would be premature to suggest that it is unwound or that meaningful levels of pessimism have emerged,\u201d Delwiche said. \u201cThe lack of fiscal stimulus and continued unrest ahead of the November election raise the risk that the pace of recovery will not just slow, but that activity may actually tick lower.\u201d \n "

"S&P 500\u2019s fourth week of losses sounds alarm on economic growth"

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