Halloween Jitters

By Matthew Klein |  Friday, October 30

Investors Take Fright. It was another brutal day for markets, with the S&P 500 large-cap stock index losing 1.2% on Friday, capping off a week in which the index lost 5.6% of its value. (The biggest loser was Twitter, which plunged 21% after beating earnings.) That’s the worst five-session stretch for the S&P since the week ending March 20, which was shortly before the stock market hit bottom. Had it not been for a rally in the last 30 minutes before the close, the market would have been down 2% for the day and 6.5% for the week.

Overall, 289 components of the S&P fell on Friday. The sectoral picture was more balanced, with three categories essentially flat (health care, industrials, and materials), two that were up (energy and financials), and six that were down. Of those, technology, consumer discretionary, and communication services were hit the hardest. Unsurprisingly, the tech-heavy Nasdaq Composite index was down 2.5% today, although several tech companies were in the green, most notably Alphabet, which was up 4%.

Lindsey Bell of Ally Invest notes that the market has lost almost 6% since the start of the third quarter earnings season on Oct. 13—“the worst start to an earnings season since 2007.” Her optimistic view is that “investors may be so anxious that they’re taking profits in stocks that soared into earnings season,” including Twitter.

But the market drop in October has coincided with rising bond yields, a falling gold price, and a rising dollar. (While the copper price is up slightly for the month, it’s down sharply for the week.) That’s consistent with heightened risk aversion, which isn’t surprising given the rapid resurgence of the coronavirus across much of Europe and the U.S. European stocks have fared about as badly as their American counterparts, with German shares hit particularly hard, down 8.6% over the past week.

On the other hand, some of the (relatively) stronger performers in the past few weeks include the beleaguered cruise line stocks of Carnival, Royal Caribbean, and Norwegian. That doesn’t really fit with a narrative about renewed virus concerns. Reason for hope. 

Watch our TV show on Fox Business Friday at 10 p.m. or 11:30 p.m. ET; Saturday at 10 a.m. or 11:30 a.m.; or Sunday at 6:30 a.m., 10 a.m., or 11:30 a.m. This week, get insights on the Fed, markets and economy from Jason Brady, CEO of Thornburg Investment Management. Plus, take a look at how charts can give a misleading impression of the economy.