U.S. Markets

Stocks posted big gains in October, propelled by better-than-expected corporate reports.

The Dow Jones Industrial Average led, gaining 13.95 percent. The Standard & Poor’s 500 Index tacked on 7.99 percent, while the Nasdaq Composite added 3.90 percent.1

A Volatile Few Weeks

October opened with a powerful two-day rally, but the momentum faded. News that Britain’s prime minister had reversed her tax cut proposal helped spark the rally, but the gains were erased on renewed fears of higher interest rates and possible recession.2

Market volatility accelerated when a higher-than-expected consumer inflation number sent stocks tumbling in early trading before inexplicably staging a massive reversal that saw the Dow Industrial rally 1,500 points from its intraday low.3

Earnings Spark Rally

As earnings season opened mid-month, investors put aside worries about Fed policy and recession to focus on how companies fared in the third quarter.

By the end of October, 263 companies in the S&P 500 index had reported earnings, and 73.4 percent had topped Wall Street analysts’ estimates – above the 66 percent long-term average. Sales rose by 10.3 percent, but much of that gain was attributed to the effects of inflation.4

Mega-Cap Tech Blues

Several mega-cap technology names checked in with disappointing earnings for the quarter and provided weak guidance for the months ahead. The news surprised some investors and resulted in lower stock prices.

Old Economy Names Sparkly

While the mega-caps struggled with declining advertising, poor expense management, and a deceleration in cloud-computing growth, some “old economy” names checked in with quarterly numbers that were above expectations. For instance, in the industrials industry group sector, 83 percent of companies reported earnings above expectations compared with the 73.4 percent average.5

This divergence in third-quarter earnings between mega-cap tech and old economy names contributed to the wide dispersion in performance between the Dow Industrials and Nasdaq Composite this month.

Sector Scorecard

All industry sectors notched gains in October, with gains in Communications Services (+0.67 percent), Consumer Discretionary (+1.11 percent), Consumer Staples (+9.01 percent), Energy (+24.97 percent), Financials (+11.92 percent), Health Care (+9.61 percent), Industrials (+13.89 percent), Materials (+8.93 percent), Real Estate (+2.00 percent), Technology (+7.85 percent), and Utilities (+1.94 percent).6

What Investors May Be Talking About in November 2022

November will be a busy month for investors.

First, the market will be digesting another Fed change to interest rates and the outcome of the midterm elections. Investors will also be getting updates on inflation and the labor market.

The Consumer Price Index is set for release on November 10th, and investors will be anxious to see if inflation is moderating. The Producer Price Index will be released on November 15th, providing insights into the cost pressures producers of goods and services face.

In addition, investors’ attention is expected to be focused on monthly employment reports and the weekly initial jobless claims. Trends in the job markets and wage growth will play a role in the Fed’s future decisions about interest rates.