Markets experienced another difficult month, weighed down by the familiar concerns surrounding China, oil prices and soft domestic economic data. A series of dismal economic reports came out of China spooking investors.

Meanwhile, oil prices continued their downward slide despite fluctuating some days in the month. Most domestic economic numbers were a cause for concern except for GDP data and the unemployment rate. Additionally, uncertainty about the timing of the rate hike continued to weigh on investor sentiment. 

September’s Performance

For the month, the Dow, S&P 500 and Nasdaq slumped 1.5%, 2.6% and 3.4%, respectively. A series of poor economic reports coming out of China dampened investor sentiment. Meanwhile, the Fed’s decision to keep the key rates unchanged during the FOMC meeting this month also weighed on markets.

Moreover, U.S. Democratic presidential hopeful Hillary Clinton’s comments to prevent “price gouging” for specialty drugs had a detrimental impact on biotech stocks in the latter half of the month. Continuing decline in crude had a negative impact on major benchmarks throughout the month.

Meanwhile, better-than-expected second quarter GDP numbers indicated that the US economy is back on track. Other economic reports were largely disappointing. Separately, Volkswagen’s (VLKAY – Snapshot Report) alleged scandal related to vehicle emission tests and a massive decline in Caterpillar Inc.’s (CAT – Analyst Report) shares following job cut announcement dented investor confidence.

Q2 GDP Improves

According to “third estimate” released by the U.S. Department of Commerce, the economy grew at a pace of 3.9%, higher than the consensus estimate and previously projected growth of 3.7%.

This was also significantly higher than first quarter’s sluggish growth rate of 0.6%. According to the report, increasing consumer spending and non-residential investment played major roles in boosting the economy in the second quarter.

Unemployment Rate at Record Low

The U.S. economy created a total of 173,000 jobs in August, less than the consensus estimate of 216,000. This also marked the slowest increase in job creations since March. Bulk of the hiring took place in the healthcare sector. However, oil companies trimmed jobs due to slump in oil prices. Manufacturing sector also cut jobs as a stronger dollar made export oriented goods expensive.

Meanwhile, June and July’s job additions were revised higher. While June’s job additions were revised upward from 231,000 to 245,000. The unemployment rate fell to 5.1% in August, its lowest level since Apr 2008. It was also lower than the consensus estimate of 5.2%. The unemployment rate was within the Fed’s goal of full employment; within the range of 5% to 5.2%.

Disappointing Domestic Data

Other economic reports did not paint an optimistic picture. The ISM Manufacturing Index, construction spending, factory orders and capacity utilization all came in below expectations. Industrial production experienced a larger contraction than was expected, falling by 0.4% instead of expectations of a 0.2% decline.

PPI did not decline as expected, but remained flat while CPI fell. Durable orders contracted by 2%, instead of expectations of a 2.2% fall. Though a year-over-year gain of 0.3% in PCE index – an important indicator of inflation –  indicated that the inflation rate is significantly below the Fed’s target of 2%, a rise of 0.4% in consumer spending in August indicated rising demand. It was also higher than the consensus estimate of 0.3% gain.