Level 1 — Absolute Beginner
The stock market has a hard month. September ends on Wednesday. The Dow, a famous list of 30 big companies, falls more than 4 percent in September.
The Nasdaq is different. It goes up 0.24 percent on Wednesday. Tech companies that make chips and work on AI help it grow.
Why is the Dow down? Bond yields are high. A bond is a loan to the government. The yield is the money you get for the loan. This month, the 10 year yield reaches 5.2 percent. That is the highest since 2007.
Now a new quarter starts. Investors hope for a calmer October.
- stock market
- A place where people buy and sell parts of companies.
- Dow
- A list of 30 large American companies.
- percent
- A part of one hundred.
- tech
- Short for technology, like computers and phones.
- bond
- A loan to a government or a company.
- yield
- The money you earn from a loan each year.
- quarter
- Three months of a year.
- investor
- A person who puts money into something to earn more.
Level 2 — Elementary
Wall Street ended September with mixed results. On Wednesday, the Nasdaq rose 0.24 percent to 26,861. The S&P 500 fell 0.25 percent to 7,651, and the Dow lost 0.86 percent to 50,906.
For the whole month, the Dow dropped more than 4 percent. The Nasdaq gained about 2 percent. Chip makers and AI companies lifted the Nasdaq, while many other companies struggled.
The main problem was rising bond yields. On September 25, the yield on the 10 year Treasury reached 5.234 percent. That was the highest level since June 2007. When yields rise, borrowing costs more, and shares often become less attractive.
Good news came this week. A report on inflation was cooler than expected, so investors now think the Federal Reserve may not raise interest rates soon. Even so, the Nasdaq finished its second quarter in a row with a gain.
- Wall Street
- A name for the American financial industry.
- index
- A number that shows how a group of shares is doing.
- Treasury
- The part of the government that borrows money by selling bonds.
- borrowing
- Taking money that you must pay back later.
- shares
- Small parts of a company that people can own.
- inflation
- A rise in prices over time.
- interest rates
- The cost of borrowing money, shown as a percent.
- quarter
- A period of three months.
Level 3 — Intermediate
Wall Street closed the third quarter with a split verdict. On Wednesday, the Nasdaq Composite edged up 0.24 percent to 26,861, while the S&P 500 slipped 0.25 percent to 7,651 and the Dow Jones Industrial Average fell 0.86 percent to 50,906. The S&P had climbed by as much as 0.7 percent during the session before stocks reversed in the final minutes.
For September as a whole, the Dow lost more than 4 percent, the S&P 500 slipped slightly, and the Nasdaq gained roughly 2 percent. Over the full quarter, the S&P rose about 2 percent and the Nasdaq about 2.5 percent, giving the tech heavy index two straight quarterly advances, while the Dow lost 2.7 percent.
The split reflects a bond market under strain. The yield on the 10 year Treasury touched 5.234 percent on September 25, its highest since June 2007, driven by persistent inflation, heavy government borrowing and heavy corporate spending. Higher yields weigh on the economy sensitive companies that dominate the Dow, while semiconductor and AI related stocks supported the Nasdaq.
A softer than expected inflation reading this week eased fears of a Federal Reserve rate increase, and data on growth, consumer spending and private hiring pointed to a resilient economy. Still, rising oil prices tied to the war with Iran keep inflation worries alive as investors enter the fourth quarter.
- verdict
- A final decision or judgment.
- composite
- Made up of many different parts.
- reversed
- Changed direction to the opposite.
- advances
- Gains or forward steps.
- under strain
- Facing heavy pressure.
- persistent
- Continuing for a long time without stopping.
- resilient
- Able to recover or stay strong after problems.
- semiconductor
- A material used in computer chips.
Level 4 — Advanced
American equities concluded a turbulent third quarter on a divided note on Wednesday, with the Nasdaq Composite inching up 0.24 percent to 26,861 even as the S&P 500 surrendered 0.25 percent to 7,651 and the Dow Jones Industrial Average shed 0.86 percent to 50,906. The broader gauge had been ahead by as much as 0.7 percent before a late reversal erased its gains.
September inflicted the heaviest damage on the Dow, which dropped more than 4 percent, while the Nasdaq advanced roughly 2 percent and the S&P 500 finished marginally lower. Across the quarter, the S&P gained about 2 percent and the Nasdaq about 2.5 percent, delivering the technology heavy index consecutive quarterly gains, whereas the Dow ceded 2.7 percent.
The divergence has a clear bond market origin. The benchmark 10 year Treasury yield touched 5.234 percent on September 25, a level not seen since June 2007, pushed up by stubborn inflation, abundant government issuance and elevated capital spending. Rising yields are particularly punishing for the cyclical, price weighted constituents of the Dow, while semiconductor and artificial intelligence names continued to attract buyers to the Nasdaq.
This week's cooler than forecast inflation print tempered expectations of another Federal Reserve rate increase, and robust growth, spending and private payroll figures underscored the economy's durability. Yet oil prices elevated by the conflict with Iran leave inflation anxieties unresolved, and the traditionally feeble month of September offers little comfort as investors turn to October.
- equities
- Shares of companies traded on a stock market.
- gauge
- A measure or indicator of something.
- marginally
- By a very small amount.
- ceded
- Gave up or surrendered.
- divergence
- A growing difference between two things.
- issuance
- The act of releasing bonds or shares for sale.
- cyclical
- Closely tied to the ups and downs of the economy.
- durability
- The ability to last and stay strong.