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Wall Street Q3 performance rewind and Q4 outlook

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U.S. markets: Q3 performance and outlook for Q4

Overall, the third quarter was quite the rollercoaster ride for the markets, where the Dow and Nasdaq ended in the negative territory, while the S&P 500 closed marginally in the green for the quarter. The quarter started off with large caps outperforming small caps in July and the S&P 500, the Dow, and the Nasdaq advancing to record highs. This rally continued well into August where the indices recorded several highs attributed to strong corporate earnings and improved economic conditions. 


 

After the long stretch of gains, September saw the market struggle with volatility – where the indices wiped out its quarterly gains seen in July and August. Despite the downturns seen during the quarter, the benchmark indexes remain well ahead of their 2020 closing values, led by the S&P 500 which ended the quarter almost 15% higher than last year’s closing.


Sectoral Performance

During the quarter, growth stocks outpaced value stocks with gains seen in large-cap index stocks. Financials, communication services, and technology sectors led the market rally along with the healthcare sector. 


Sectoral performance


Top-performing S&P 500 stocks

Moderna Inc. (MRNA) at 291.35%, Bath & Body Works Inc. (BBWI) at 128.37%, Devon Energy Corp. (DVN) at 121.38%, Marathon Oil Corp. (MRO) at 104.80%, and Nucor Corp. (NUE) at 95.38% were among the top-performing S&P 500 stocks YTD at the end of September 2021.


Key takeaways from Q3

Corporate earnings beat analysts’ expectations: Over 88% of the S&P 500 companies reported earnings above the consensus estimates.


Progress in Covid-19 vaccinations and Immunity: Q3 was the first quarter in over a year where the US economy was reopened with progress in the mass vaccinations.

 

U.S. employment: The full-year unemployment projections are set to improve to 4.5% in 2021.

 

Interest rate expectations: The Fed is preparing to reduce its monthly bond-buying activity as early as November 2021.

 

Inflation forecast for the year raised: The supply-side impact is leading to higher prices and inflationary pressure. 

 

Commodities saw a good quarter in Q3: Crude oil prices gained 9.4% to end the quarter at $75 per barrel.

 

Q3 Corporate earnings to remain positive: Q3 earnings for S&P 500 are likely to be higher by 26% year-on-year.


Outlook for the next quarter

Looking ahead at the fourth quarter, we may face challenges in terms of supply chain bottlenecks leading to rising costs. However, the macro-economic and long-term growth indicators are intact for the U.S. economy. The increase in consumption post the re-opening and improved unemployment data along with strong quarter-on-quarter corporate earnings are likely to play a major catalyst for the overall growth in Q4.

 

If you’re keen on knowing more about the Q3 performance and outlook for Q4 in detail, do check out our detailed report.

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