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October’s scary ending fails to spoil stock gains
By Karl Henkel
YOUNGSTOWN
Despite a Halloween scare, Monday’s trick wasn’t enough to overshadow shareholders’ monthlong market-gains treat.
It did, however, prevent a little history.
The Dow Jones Industrial Average, which entered the week on pace for its best monthly increase since August 1982, climbed 9.5 percent in October, the third-highest single-month gain in 115 years.
It opened the month at 10,912.10 and closed at 11,955.01.
That came despite a pitiful final day Monday in which the Dow fell 276.10 points, or 2.26 percent.
“It was a pretty solid month,” said Brian Laraway, partner and vice president of Bury Financial Group in Poland.
The S&P 500 and Nasdaq Stock Exchange each gained 11 percent in October.
Strong corporate-earnings reports across many sectors were a top reason for the financial gains, said Laraway, who noted that about 70 percent of companies are meeting or beating expectations.
“When we look long term, the market is going to follow those earnings,” he said.
Manufacturing-related companies, such as Caterpillar, which saw its shares rise 28 percent in October, and technology companies such as Citrix Systems Inc., a networking and cloud company, whose shares jumped 13.4 percent, had the biggest gains.
It was a welcome change for October, which had the dubious task of following the third quarter, the worst three-month stretch since the financial crisis.
Analysts didn’t have high hopes for the month, which isn’t typically great for shareholders.
In fact, it’s been part of some of the worst events in market history, including in 1929, when it ushered in the Great Depression, in 1987, during Black Monday and most recently in 2008 during the global credit crisis.
But this year, everything seemed to change course.
“Stocks had been very weak since April due largely to issues such as the U.S. budget debate, debt ceiling and downgrade,” said Robert Gardner, CPA and financial adviser with Stifel, Nicolaus & Co. Inc., Butler Wick Division in Canfield.
“Then some long-awaited, positive news was announced relative to the European banking crisis, which provided a nice bounce.”
But that’s also a reason to worry, like on Monday, when MF Global Holdings Ltd., a futures broker that gambled on the European debt crisis, filed for Chapter 11 bankruptcy; and the apparent softening on the plans for the European financial restructuring.
“Once there was a plan in place, there was a relief,” Laraway said. “But until we really know those details, they are still working through [them].”
Gardner also warned against an adjustment especially with the pending Budget Super Committee report, due out Nov. 23, which will outline more than $1 trillion in federal spending cuts.
If negotiations are as aggrandized as this summer’s debt ceiling and deficit reduction talks, it could take economy on another wild swing.
But if things go unchanged, it could extend an already positive year, especially since November and December are generally positive months for the market.
“We are looking at a positive year to date,” Laraway said. “That’s a good place to start.”