Other than savvy short-sellers who got their hooks into companies like Netflix (NFLX) near their highs, most investors likely had a miserable third quarter, filled with huge volatility and punishing drops for companies big and small.
In fact, it was the worst quarter for stocks in the S&P 500 since the fourth quarter of 2008. The S&P 500 fell 14.3% in the quarter to 1,131.4. It was the largest third-quarter drop in the history of the index on a point basis and the largest percentage drop since 2002. The Dow was off 12.1% in the quarter, its worst showing since the first quarter of 2009 on a percentage basis. It closed at 10,913.4, dipping below 11,000 after falling 241 points on Friday.
The Wilshire 5,000 dropped 7.9% in the quarter, a paper loss of $1.2 trillion.
A down-to-the-wire fight over whether to raise the U.S. debt ceiling, a decision by Standard & Poor’s to cut the U.S. credit rating to AA, and escalating fears about European debt conspired to drive huge volatility in the market even during the depths of the summer. Stocks fell more than they rose, but the good days were just as dramatic as the bad — on August 9, for instance, the Dow jumped 430 points after a 600-point rally in the final hour of trading.
Treasury yields plunged during the quarter as investors fled to safety. The 10-year Treasury yield fell more than 120 basis points in the quarter, and hit a modern low of 1.672% last week.
Among the worst performers in the Dow was Bank of America (BAC), which continues to swoon despite a $5 billion investment from Warren Buffett. Shares were down 44% in the quarter and ended just 12 cents above its 52-week high. Alcoa (AA) plunged 40% and Hewlett-Packard (HPQ) dropped 38% in the quarter.
For the year, the Dow is down 5.7%. Of the 44 times the Dow has ended the third quarter in negative territory, it ended the year in the red 80% of the time.
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