Major equity markets put in a bumpy performance this past month, pulling back considerably in the first half and then staging an impressive comeback over the past two weeks netting October gains of about 2%. The NASDAQ moved higher on the month by 3%.
In the latest five trading sessions, the Dow Industrials and the Standard & Poor’s 500 managed to close at all-time highs with the Dow up 575 points or 3.5%, the S&P ahead by 2.7% and the NASDAQ up by 3.3%. Small caps did even better with gains nearing 5% for the Russell 2000. Advancing stocks led decliners by 3 to 1 and over 440 stocks on the NYSE hit new 52-week highs including 3M, CVS Health, Kimberly-Clark, United Parcel Service and Teva Pharmaceutical. All market sectors gained for the week led by financials, healthcare and telecom. While problems persist in Europe, and some investors are concerned about waning growth in China, the U.S. economy remains quite resilient, allowing the Federal Reserve to close out its asset purchases as planned; although this curtailment is not very popular with traders. Sorry traders, it is not the Fed’s job to move equity prices higher. The Bank of Japan, however, took an opposite view, increasing their stimulus program that surprised Wall Street and help to send stocks higher here at home and gold prices to multi-year lows. Oil weakened a bit, but may have reached its lows for now. Corporate profits remain healthy as the third quarter earnings season came in quite strong and, with the exception of a strong dollar effect on multinationals, I believe fourth quarter figures will be decent as well. Two buttonwoodproject names we will hear from this week are CVS Health, which is expected to earn $1.13 for the third quarter vs. $1.05 a year-ago and QUALCOMM on Wednesday with its fourth quarter results ($1.31 vs. $1.05). In all, the good news could well continue to the end of the year, although the recent spike in volatility and peaking valuations suggests a higher level of risk as the bull market is growing long in the tooth.