Wall Street Just Had Its Worst Month Since March 2020

Stocks closed higher Monday, but still logged their worst monthly loss since the early days of the pandemic, as Wall Street closes a tumultuous January wracked by worries that imminent interest-rate hikes will make everything in markets more challenging. The S&P 500 rose 1.9%, but it’s still down 5.9% since setting a record exactly four weeks ago. It lost 5.3% this month, its worst since falling 12.5% in March 2020, when it hit bottom after the pandemic suddenly shut down the global economy. The Dow Jones Industrial Average rose 1.2% and the Nasdaq composite climbed 3.4%, its biggest single-day gain since early November 2020. Both also ended in the red for January, with the Dow shedding 3.3% and the Nasdaq losing 9%, the AP reports.

Wall Street was shaken this month as investors tried to get ahead of a massive shift in markets, where the Federal Reserve is about to start withdrawing the tremendous stimulus it’s pumped into the economy and markets. The wide expectation is for the Fed to begin raising interest rates in March, among other moves to make borrowing money less easy. But uncertainty about how sharply and how quickly the Fed will move has helped cause severe swings on Wall Street, not just day-to-day but also hour-to-hour. Morning drops for stocks have quickly given way to sharp losses in the afternoon, and vice versa. On Friday, a sudden upturn in the last hour of trading managed to keep the S&P 500 from logging its fourth weekly loss in a row.

"There’s systematic buying that goes on at the end of a really bad month like January, and that’s certainly taken place over the last day or two,” says Scott Lander, chief investment officer at Horizon Investments. The month's heaviest losses have concentrated on parts of the stock market seen as the most expensive. Much of the focus has been on high-growth technology stocks, which were stars of the pandemic amid expectations they can grow regardless of the economy. Tech stocks in the S&P 500 are down 7.9% this month, though they jumped 1.6% Monday. (More stock market stories.)