The Dow falls 350 points in afternoon trade as a brutal month draws to a close

US stocks traded lower after a choppy start on the final day of a brutal month and quarter for markets as investors grew fears that aggressive Federal Reserve rate hikes will push the economy into a downturn to quell inflation.

What’s happening
  • The Dow Jones Industrial Average DJIA,
    fell 350 points, or 1.2%, to 28,875.

  • The S&P 500 SPX,
    fell 34 points, or 0.9%, to 3,607.

  • The Nasdaq Composite COMP,
    lost 92 points or 0.9% to trade at 10,645.

As of Thursday, the S&P 500 was down 7.9% in September, 3.8% in the third quarter and more than 23% year-to-date. What moves the markets

What moves the market

In line with historical pattern, US equities suffered in September as an assertive Federal Reserve helped boost Treasury yields and the dollar, which in turn undermined equity valuations.

See: It’s the worst September for stocks since 2008. What that means for October.

But after more than two weeks of near-continuous selling, equity bulls nibbled again, with some looking to buy stocks at relatively low valuations, said Eric Diton, president and chief executive officer of the Wealth Alliance.

“The market is exhausted on the downside,” Diton said. “The sale has been running continuously for more than two weeks.”

Read: Will October be another “bear killer” in the stock market? Why investors need to be careful with seasonal trends.

As the month drew to a close on Friday, investors digested a reading of the August personal spending inflation index, which showed core consumer prices rose 0.6% last month, more than Wall Street’s forecast of 0 .5%. The core inflation measure excludes volatile food and energy prices.

See: Cheaper gasoline keeps inflation down, PCE shows, but the cost of everything else is still rising fast

The read broadly confirmed similar data from the CPI, another closely watched barometer of inflation, which sent stocks lower earlier this month. Since this report was published just over two weeks ago, the S&P 500 is down more than 10%.

Investors know inflation is “in the works,” Diton said, but the US economy is still in far better shape than the economies of Europe, Japan and China, he said.

“We’re the best game in town. Nobody is looking good right now, but Europe certainly has real problems, China has problems, Japan has problems – and out there is the Ukraine war,” Diton said.

To underscore the point, euro-zone data showed that inflation accelerated at a record pace over the past month.

See: Eurozone inflation hits new record high of 10% in September

In other news, investors also heard from Fed Vice Chair Lael Brainard, who reiterated that the central bank would keep interest rates high to fight inflation, even if it hurts the economy.

See: The Fed will not back out of rate hikes prematurely, Brainard says

Because high interest rates will take time to bring inflation down, Brainard said the Fed is “obligated to avoid an early exit.”

Investors also kept tabs on megacap tech stocks. apple inc AAPL was traded 1.5% lower on Friday after leading markets fell a day earlier following a Bank of America downgrade.

Have to know: So investors should start betting on Apple and the stock market now

A final reading of the University of Michigan Consumer Sentiment Index for September showed that consumers’ view of the economy improved somewhat over the month on the back of falling gas prices, although their outlook remained broadly pessimistic.

See: US consumers remain pessimistic about the economy even as inflation fears ease

Stocks in focus
  • shares of Nike Inc.
    fell 12.2% after executives at the sportswear maker said price cuts to clear inventory in North America would hurt gross margins for the remainder of the fiscal year. Analysts have raised red flags and lowered price targets on the stock.

  • Micron technology
    The stock rose 2% after it was announced that Japan will give it a $320 million subsidy to manufacture advanced memory chips at its Hiroshima plant. This comes a day after Micron released quarterly results that included a forecast for a loss in the coming quarter and plans to scale back capacity builds.

— Steve Goldstein and Barbara Kollmeyer contributed to this article The Dow falls 350 points in afternoon trade as a brutal month draws to a close

Brian Lowry

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