Ghastly stretch closes serenely
One of the scariest months in stock market history is over, after weeks of nasty tricks gave way to a pair of solid gains that pushed the Dow Jones industrial average to its highest level in almost three weeks.
The Dow finished a Halloween session Friday at 9,325.01, up 144.32 points, or 1.6%, on the day, giving the index its first back-to-back daily advances since September. And thanks in large part to an 889-point rally on Tuesday, the blue-chip average ended up 11% for the week -- its biggest weekly gain since 1974.
But the Dow still fell 14% in October, its biggest monthly loss in more than 10 years and its worst October since 1987’s Black Monday crash.
U.S.-traded stocks lost $2.5 trillion in market value last month, according to the Dow Jones Wilshire 5,000 index, which includes almost all U.S. stocks.
“It’s been a very tough month,” said Michael Nasto, senior trader with U.S. Global Investors in San Antonio.
And even before it began, investors were reeling from heavy losses in their brokerage and mutual fund accounts.
“If you were crying when you opened your September statement, don’t even go near your October statement,” advised Howard Silverblatt, senior index analyst with Standard & Poor’s in New York.
The S&P; 500 index, which climbed 1.5% on Friday, rose or fell at least 1% on 20 of 23 trading days last month. That made it the most volatile month for the benchmark index since the early 1930s.
Technology shares, which have been on a run, sent the Nasdaq composite index up 1.3% on Friday, its fourth straight gain. For the week, the Nasdaq and S&P; 500 were both up 11%.
Some analysts are hopeful the market may be entering calmer waters. To a certain extent, they say, the fallout from the failure of Lehman Bros. Holdings Inc. on Sept. 15, which touched off the current credit crisis, and the gathering clouds of global recession have already been “baked into the cake” by investors.
“The news about the economy isn’t really news at all,” said Jeffrey Coons, co-director of research at Manning & Napier Advisors in Fairport, N.Y. “We all know that we’re headed for a slowdown.”
Indeed, the market managed to notch solid gains Thursday and Friday despite reports showing that the U.S. economy contracted in the third quarter by the biggest amount since 2001 as Americans reined in spending at a pace not seen in 28 years.
Coons hopes that’s a sign the market may be starting to bottom. Still, he said, with major market averages last month down more than 40% from their record highs set a year ago, “it’s going to take a while to rebuild confidence.”
Some analysts think investors are underestimating the depths of the current downturn. Consumers reeling from losses in home values and 401(k) plans are likely to make this the worst Christmas for retailers in years. And while government efforts to thaw global credit markets are showing some evidence of success, interest rates and lending activity are still far from normal.
On Friday, for instance, the three-month Treasury bill yielded 0.43%. That was up from 0.37% on Thursday but well below 0.87% last Friday. Part of the drop was due to the Federal Reserve’s half-point cut of its benchmark rate Wednesday, but it’s also a sign that many investors would rather shovel their cash into super-safe T-bills than risk it in the stock market.
Tuesday’s election may help bring some stability.
“As soon as the presidential election is over, we believe much of the stock market’s volatility will subside and banks might get back to the lending business,” market analyst Louis Navellier wrote in his weekly newsletter Friday.
With the global financial crisis looming over everything, the new president’s policy options will be limited no matter who wins. His biggest decision may be his choice of Treasury secretary, said Chris Cordaro, chief investment officer at RegentAtlantic Capital in Morristown, N.J.
The market is entering a period of the calendar -- November through April -- that historically has been good for stock prices, Navellier noted.
Stocks gave investors a few thrills before the closing bell Friday. Up 274 points with one hour left in the trading day, the Dow plunged almost 250 points before rebounding in the last few minutes.
Oil rose $1.85 a barrel to $67.81 but still finished October with its biggest monthly decline since crude futures began trading in New York 25 years ago. At the end of September, the near-month oil contract traded at $100.64 a barrel.
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