Stocks just had their worst month of the year as the 'September Effect' set in. These 4 charts tell the story.

• Stocks had their worst month of 2023 in September. The S&P 500 fell 5% and the Nasdaq dropped 6%.
• Wall Street's worries about sticky inflation and the Fed's interest-rate hikes drove those losses.

US investors are nursing their wounds as the fourth quarter rolls in, after a bruising September took some of the shine off this year's stock-market rally.

The benchmark S&P 500 index fell 5% in its worst month of the year, while the Nasdaq Composite and Dow Jones Industrial Average slipped 6% and 4% respectively.

It's the second month in a row that each of the US's big three indices have posted losses – and even the "Magnificent Seven" weren't able to deliver returns for their shareholders.

The group of mega-cap stocks – made up of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla – powered much of the market's gains over the first half of 2023, but struggled in September.

Of the seven Big Tech giants, only Meta and Tesla were able to finish the month in the green.

Meanwhile, Apple and Nvidia had dismal months, with both stocks plunging 10% to wipe hundreds of billions of dollars off their total valuations.

The end of the third quarter does tend to be a miserable time for stocks – leading to traders coining the term "September Effect".

2023 marked the fourth year in a row that the S&P 500 logged losses in September, per data from Deutsche Bank.

Rather than some sort of pre-Halloween hex, oil and the Federal Reserve were the two factors that drove US equities' miserable month, analysts said.

"The declines had several causes, but an important one was the growing sense that central banks were likely to keep interest rates higher for longer, alongside a $20 a barrel rise in oil prices over the quarter," macro strategist Henry Allen wrote in a research note Monday.

In September, Fed Chair Jerome Powell pledged to stay vigilant on inflation, which has slowed in 2023 but is still running ahead of the central bank's 2% target.

Traders now only expect interest rates to start falling in the second half of 2024, per the CME Group's FedWatch tool. Higher borrowing costs tend to be bad news for stocks, because they boost the relative appeal of low-risk, low-return assets like bonds and cash.

You can sum up Wall Street's renewed worries about the Fed by looking at how the US Dollar Index performed in September.

Unlike stocks, the greenback tends to perform well when interest rates are expected to rise or remain high, because it becomes more attractive to foreign investors seeking juicier yields.

The gauge, which tracks the dollar's strength against six other currencies, climbed 2% in September to hit a fresh 2023 high.

It's now on an 11-week winning streak, with investors betting the Fed's inflation fight is nowhere near over.

Oil is one reason that those same investors are becoming more and more certain that the battle against soaring prices isn't done yet.

Benchmark Brent and West Texas Intermediate crude prices climbed by a fifth over the third quarter.

Each topped $90 a barrel toward the end of September, before giving up some of their gains at the end of the month. Higher benchmark oil prices tend to be bad news for inflation gauges, because they have the knock-on effect of driving up the cost of everyday products – especially gasoline.

Those four charts tell the story of another miserable September, when the worries that doomed stocks in 2022 – red-hot inflation, the Fed's aggressive rate hikes, a rampant dollar, and soaring commodity costs – came to the fore once again.