October stock market rally may not carry into November

31 Oct 2015 | Author: | No comments yet »

U.S. Stocks Lock in Big Gains for October.

U.S. stocks ended Friday’s session lower, but the main indexes recorded a fifth straight week of gains and booked the largest monthly gain in four years.U.S. equity markets were lower on the last trading day of October as traders parsed a fresh round of economic data, but Wall Street still booked solid gains for the month.

Investors attributed the broad stock-market gains this past month to global central banks, which have either talked up the prospect of further stimulus to boost sagging inflation and growth, or delayed interest-rate increases that would tighten monetary policy. On Friday, the Dow slipped 92.26 points, or 0.5%, to 17663.54 and the S&P 500 lost 10.05 points, or 0.5%, to 2079.36, weighed down by financial companies, which pulled back after rallying earlier in the week. The Nasdaq Composite edged down 20.53 points, or 0.4%, to 5053.75. “The rally in October has been fantastic and extremely strong,” said David Lyon, global investment specialist in San Francisco for J.P. Materials, technology, and energy looked to be the month’s best performers – they were also last quarter’s biggest losers — while the utilities sector was on track for the title of October’s biggest laggard. Morgan Private Bank. “The volatility that reared up in August and September was really driven by two things, China and worries about the [Federal Reserve] and rate hikes,” but both fears lessened in October.

On Wednesday the Federal Reserve opted to keep rates steady, but altered language in its policy statement that left the door slightly more ajar for a rate hike at its December meeting. In addition, the Japanese central bank pushed back the timeframe in which it hopes to achieve a 2% inflation target from the middle of 2016 out as far as early 2017. Shares of LinkedIn climbed 23.87, or 11%, to 240.87 after the social-networking company late Thursday reported a smaller-than-expected third-quarter loss and raised its guidance for the year. Consumer prices in the nation, excluding food and energy, were said to have risen 0.9% in September from 0.8% the month prior. “Not only has the Fed deferred tightening, but the ECB is sending a strong signal that it is contemplating expansionary measures by December 2015 and it is likely/inevitable that BoJ would at some stage increase both the size and pace of its own stimulus,” Larry Shover, chief investment strategist at Solutions Funds Group said. Most of the gains over the past month have come from the largest publicly traded companies, including big moves from Apple, Alphabet—the parent company of Google—and Amazon.com.

AMZN -0.10 % “It’s a combination of relief that the China troubles aren’t going to cause a world-wide recession and decent earnings,” said Don Townswick, director of equities at Conning & Co. The U.S. dollar was down 0.52% against the Japanese Yen in recent action. “I think the USD/JPY elastic is stretched about a far as it can be, and while the BoJ can certainly get the Nikkei higher, it will struggle to weaken the Yen much. The banks’ ultralow interest-rate policies have boosted stock markets in recent years, and expectations that some central banks could keep them in place for longer have buoyed investors’ appetite for equities.

The Fed delayed raising interest rates after financial-market volatility in September, when many economists had expected the first increase in almost a decade. After its meeting Wednesday, the Fed said a December rate increase was still on the table “Investors have been whipsawed, and I think they’ve come to the conclusion that, even with comments this week, the Fed is going to be on the sidelines for a while, money will continue to be cheap, and U.S. stocks are really the only place to be in investor eyes,” said Paul Nolte, senior vice president and portfolio manager at Kingsview Asset Management. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, slid 0.16%, the German Dax added 0.46%, while the French CAC 40 fell 0.12%, and the UK’s FTSE 100 dropped 0.54%.

Also, European Central Bank President Mario Draghi recently said the bank is prepared to expand its stimulus program and potentially cut interest rates further into negative territory as the bloc struggles with low inflation and a tepid recovery. In Asia, Japan’s Nikkei added 0.8% to a two-month high Friday after the Bank of Japan 8301 2.22 % left the size of its bond-buying program unchanged but lowered its growth and inflation forecasts. Finally, a final reading on consumer sentiment from the University of Michigan showed the gauge fell to 90 in October from a preliminary reading of 92.1. Phil Flynn, senior market analyst at the PRICE Futures Group, said it’s been quite a year for energy companies as they’ve tried to balance cost cutting against an uncertain oil landscape. “Still energy stocks rebounded this month, and may be showing hope that the cutbacks in oil production will lead to higher prices and better profitability in the future,” he said in a note. “Gone are the days of obscene profits, now you just have oil company executives shouting obscenities.”

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