U.S. stocks traded lower Thursday, on pace for their worst monthly performance of the year, as investors continue to navigate a series of risks linked to energy markets, China growth and U.S. fiscal policy.
Investors were also noting key developments in the retail sector, where Bank of America issued a rare "double downgrade" on Kohl's Corp (KSS) - Get Kohl's Corporation (KSS) Report and Bed, Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report slashed its full-year profit outlook owing to what it called "unprecedented supply chain challenges."
Senate Democrats may have neutralized at least one of those concerns Thursday with a bill they say can avoid a Friday government shutdown while finding support across party lines. Majority Leader Chuck Schumer will hold a vote this morning, paving the way to President Joe Biden's desk prior to the midnight deadline.
In China, however, a surprise slowdown in China manufacturing activity this month, linked to rolling power cuts across the industrial northeast, underscored the myriad challenges facing the world's second largest economy heading into the final months of the year.
"Worries about China, the pandemic, the debt ceiling and tax legislation are weighing on investors right now, but it is important to understand which issues may create structural change and which ones create short-term volatility that investors can take advantage of," said Tom Mantione, managing director, UBS Private Wealth Management.
"While Fed officials seem more hawkish when it comes to interest rate hikes, a gradual movement to normalized rates in the U.S. would neither be bad for the economy nor the market, as there is generally a positive correlation at the start of a new Fed cycle between interest rates and stocks."
On Wall Street, the Dow Jones Industrial Average fell 330 points by late-morning on the final trading day of the quarter, while the S&P 500, which is down 3.6% for the September, fell 25 points lower.
Jobless claims rose to 362,000 for the week ending September 25, the Bureau for Labor Statistics said, although continued claims -- calculated a week in arrears -- edged lower, to 2.802 million. The government's final estimate for second quarter GDP growth was also nudged higher, to 6.7%, thanks in part to solid consumer spending.
The Nasdaq Composite, facing its biggest monthly slump since September of last year, fell 10 points as benchmark 10-year note yields hover around the 1.52% level in early New York trading.
Bed, Bath & Beyond plunged 24.4% after its second quarter earnings miss and outlook cut while Kohl's fell 6.6% to 49.65 each after Bank of America cut its rating on the stock to 'underperform'.
Merck (MRK) - Get Merck & Co., Inc. (MRK) Report shares were also in focus in early Thursday trading after the pharma group confirmed plans to pay $11.5 billion for rare disease specialists Acceleron Pharma (XLRN) - Get Acceleron Pharma Inc Report.
The deal adds to a record third quarter tally for global M&A, which passed $1.5 trillion in total deal values thanks in part to Spac takeovers, gaming takeovers and fintech expansions into 'buy now, pay later' payment firms.
IPOs, however, slowed modest over the three months ending in September, with just under $100 billion raised amid a pause in China-based listings on U.S. exchanges called for by Securities & Exchange Commission Chairman Gary Gensler.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, added to its recent rally to trade at 94.405 -- the highest levels of the year -- as surging inflation prospects supported the Federal Reserve's signaling of a near-term slowdown in the pace of its $120 billion in monthly bond purchases.
In energy markets, WTI futures for November delivery traded 68 cents lower on the session at $74.15 per barrel while Brent contracts for the same month, the global pricing benchmark, were 46 cents lower at $78.18 per barrel.
Natural Gas futures for delivery on October 26 were around 1.3% lower than yesterday's highs at $5.706 per million British thermal units (mmBtu).