Market Insider

What's next for stocks after worst quarter in four years

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After the worst quarter in four years, most Wall Street strategists believe the stock market will bounce back in the fourth quarter even though the potential for headwinds is high.

Despite a nearly 2 percent rally Wednesday, the was down 6.9 percent for the third quarter, at 1,920, its worst performance since the 14.3 percent decline in the third quarter of 2011. Energy and materials were the worst performers, down 18 and 17 percent, respectively. But health care was also down double digits, losing more than 11 percent in its first negative quarter in nearly three years.

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Topping the list of worries is China, which clearly has a slowing economy but unclear how slow. The market also faces a possibly rocky earnings season, with profits expected to shrink about 3 percent, and traders wondering whether there will be a China chilling effect on corporate outlooks, either directly or indirectly. The other big factor hanging over markets continues to be the Fed which potentially could raise interest rates for the first time in nine years at one of two meetings — Oct. 28 or Dec. 16.