What’s Driving the September Stock Swoon

The S&P 500 is trading at a three-month low as surging oil prices, rising bond yields and concerns about economic growth send investors to the exits.

Why investors are so spooked

Stocks are heading for their worst month of the year as a triple whammy of soaring bond yields, rising oil prices and slowing growth trigger a widespread sell-off, even in once-loved mega-cap tech companies.

The market turmoil could put further pressure on President Biden’s sagging approval ratings, especially over his handling of the economy. A wave of strikes and the growing likelihood of a government shutdown (more on that below) may not help. The S&P 500 eked out a minuscule gain on Wednesday, after hitting a three-month low the day before. Meanwhile, the tech-heavy Nasdaq has retreated to levels last seen in late May.

Here are three charts to show why investors are worried:

Oil is barreling toward $100. For Fed officials focused on fighting inflation, that’s an ominous sign. Brent crude has soared roughly 30 percent since July and West Texas Intermediate, the U.S. benchmark, briefly topped $95 a barrel overnight, its highest level in more than a year. If rising energy prices nudge inflation even higher, the central bank could decide it needs to raise borrowing costs further and keep them elevated for longer.

Investors are dumping bonds. Yields on 10-year Treasury bills, which rise when prices fall, are at a 16-year high. The ripple effects could be felt throughout the economy because a variety of common long-term loans tend to track the yield on T-bills. On Wednesday, the 30-year fixed mortgage rate rose to 7.41 percent, a point last reached in December 2000, according to the Mortgage Bankers Association.

The A.I.-fueled tech rally is fading. Investors have piled into large-cap tech stocks for much of this year, particularly of companies that are believed to be primed to profit from the boom in artificial intelligence. The so-called “magnificent seven” — Microsoft, Meta, Apple, Amazon, Alphabet, Amazon, Tesla and the chip maker Nvidia — propelled the S&P 500 into a bull market in June. But that group is far from its July highs, sparking a wider discussion among market bears who wonder if the A.I. investor fervor was little more than a bubble in the making, even as private fund-raising and valuations are booming.

Adding to the downbeat mood were worse-than-expected results from Micron, the chip maker that wants to become a bigger supplier to Nvidia. The company reported a quarterly loss on Wednesday, sending its shares down more than 5 percent in premarket trading.