Market Recap for September 2011

Volatility was September's defining theme, as each major U.S. equity index lost value despite a string of six consecutive winning days for the Dow Jones Industrial Average and S&P 500 in the middle of the month. Stock prices initially fell in anticipation of -- and reaction to -- the August U.S. Nonfarm Payrolls report, which was released September 2 and showed no new job growth during the month. The downward trend continued after Labor Day, with prices falling in three of four sessions during the holiday-shortened week. Key concerns included Europe's ongoing debt crisis, the potential for another U.S. recession, and policy comments by President Obama and Federal Reserve Chairman Bernanke that failed to inspire widespread optimism. Momentum then shifted, and stocks surged for a week as investors gained confidence that Greece and Italy were getting a better handle on their debt problems. However, Federal Reserve policymakers subsequently voiced concerns about the domestic economy and announced new steps to stimulate it, sending markets lower again. The sell-off was also fueled by a looming U.S. congressional stalemate over government funding and disappointing manufacturing reports coming out of China and Europe. Stocks were mixed in the final days of the month, and were ultimately unable to overcome earlier losses.

Source: Standard & Poor's. The S&P 500, Dow Jones Industrials, and Nasdaq Composite are unmanaged indices. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

*Price only. Does not include dividends.

Fixed-income focus Treasuries continued to rally, with yields on 10-year government debt dropping from 2.19% at the end of August to 1.92% late in the day on September 30. Turbulence in the U.S. stock market and worries about the international economy helped boost demand for the safe-haven securities.

Mixed news on housing U.S. existing home sales jumped 7.7% to a 5.03 million-unit rate in August and a five-month high, the National Association of Realtors reported on September 21. Prices, however, dropped. The median existing home price fell to $168,300 in August, from $174,000 in July. On an annual basis, prices declined 5.1%. New home sales dropped for the fourth month in a row in August. Sales were down 2.3% from July's level, to a seasonally adjusted annual rate of 295,000 homes, according to a September 26 U.S. Census Bureau report. The median price of new houses sold was $209,100, compared with $222,000 in July. On an annual basis, prices were up 6.1%.

Uncertain outlook The Federal Open Market Committee's bleak announcement on September 21 wasn't a surprise to many market watchers. It essentially confirmed what investors already suspected: The outlook for the U.S. recovery has deteriorated. The immediate market sell-off that ensued pointed to a deeper fear that further Fed actions will not work.