Wall Street closed out its worst month and quarter of the year with losses on Friday.
The S&P 500 slipped 0.3 per cent after a gain from the morning withered, and the majority of stocks within the index sank.
The Dow Jones Industrial Average fell 158 points, or 0.5 per cent, and the Nasdaq composite edged higher by 0.1 per cent.
Solid gains for stocks early on faded as pressure built from within the bond market. After easing earlier in the day on encouraging signals about inflation, Treasury yields got back to rising as the day went on.
The yield on the 10-year Treasury yield returned to 4.58 per cent, where it was late Thursday, after dipping to 4.52 per cent. It is again near its highest level since 2007.
Treasuries are seen as some of the safest investments possible, and when they pay higher yields, investors are less likely to pay high prices for stocks and other riskier investments.
That is a big reason why the S&P 500 dropped 4.9 per cent in September to drag what had been a big gain for the year down to 11.7 per cent.
Treasury yields have been climbing sharply as Wall Street accepts a new normal where the Federal Reserve is likely to keep interest rates high for longer.
The Fed is trying to push still-high inflation down to its target, and its main tool of high interest rates does that by trying to slow the economy and hurting prices for investments.
The Fed's main interest rate is at its highest level since 2001, and the central bank indicated last week it may cut interest rates next year by less than it earlier expected.
Friday’s economic data showed that not only was inflation a touch cooler than expected in August, so was growth in spending by US consumers.
That can be a positive for inflation because it means not as many dollars are pouring into purchases. That in turn could give companies less encouragement to try to raise prices further. But it may also dent what has been a big factor keeping the US economy out of a recession.
“It came to a boil during a hot summer, and the temperature is really starting to come down,” said Brian Jacobsen, chief economist at Annex Wealth Management, of spending growth by US consumers.
“Higher energy prices, student loan debt repayments and real disposable incomes that have been on a declining trajectory since June doesn’t bode well.”
Oil prices have jumped to their highest level in more than a year, which is pressuring the economy by raising fuel costs for everyone. A barrel of US crude sank 92 cents on Friday to settle at $90.79, but it is still up sharply from $70 in June.
Brent crude, the international standard, also weakened.
The resumption of US student loan repayments, meanwhile, may funnel more dollars away from the spending by consumers that has helped to keep the economy afloat.
Another, more immediate threat for the economy could hit soon as the US government nears another possible federal shutdown.
Markets have broadly held up rather well during shutdowns, but a few crucial economic reports are scheduled for the next couple of weeks.
The latest monthly update on the US jobs market is due next week, with a couple of important reports on inflation coming the following week.
Postponements of such reports could complicate things for the Fed, which has insisted it will make decisions on interest rates based on what incoming data say about the economy.
The Fed's next meeting on rates ends on November 1.
On Wall Street, Nike jumped 6.7 per cent after reporting better profit for the latest quarter than analysts expected. Strength overseas helped it make up for some declines in North America.
On the losing end of Wall Street were stocks of energy producers, hurt by the slide in oil's price. Energy stocks in the S&P 500 fell 2 per cent as a group, more than double the loss of any of the other 10 sectors that make up the index.
Exxon Mobil fell 1.6 per cent, and Schlumberger dropped 4.3 per cent. Energy stocks, though, remain the market’s standout performers since the summer.
Shares of Ford and General Motors slipped after the United Auto Workers said it will expand its limited strike to include another facility for each. Ford fell 1.1 per cent and GM dipped 0.6 per cent.
All told, the S&P 500 slipped 11.65 points to 4,288.05. The Dow dropped 158.84 to 33,507.50, and the Nasdaq added 18.05 to 13,219.32.
In stock markets abroad, indexes were modestly higher in Europe after exchanges were closed across much of Asia.
