Hurricane Sandy spared the U.S. markets from major damage as
it roared through the northeast the last three days of October.
At month's end, Greece and China topped global markets.
SPDR S&P 500 (
), which resumed trading with the rest of the market after a
two-day halt, was down 1.80% for the month at 141.37.
PowerShares QQQ (
), tracking the 100 largest nonfinancial stocks on the Nasdaq,
was off 5.28%.
SPDR Dow Jones Industrial Average (
) fell 2.57%.
"While we could experience a temporary setback caused by
Hurricane Sandy, historical data indicates that the impact will
be relatively short-lived," said Randy Frederick, managing
director of active trading and derivatives at Charles Schwab.
"Housing, retail, consumer confidence, wages and spending remain
quite strong and rather resilient."
Frederick projects the S&P 500 will hit 1500 by year's
end, thanks to QE3 (quantitative easing) and Operation Twist.
That translates to $150 a share for SPY, up 6% from current
With some 54% of the S&P 500 companies having reported
third-quarter results, corporate earnings have fallen 1.3% year
over year -- marking the worst performance in nearly four years.
About 60% of companies have eclipsed earnings estimates, but only
40% have topped sales forecasts.
"Since most companies have been improving their efficiencies
to maintain earnings targets for two quarters now, if fourth
quarter results in only a small amount of revenue growth, we
could be setting the stage for lots of upside surprises in Q4
earnings," Frederick said.
IShares MSCI EAFE Index (
), tracking developed foreign markets, added 1.08% in the
IShares MSCI Emerging Markets Index (
) -- led by Chinese stocks -- gave back 0.42%.
Global X FTSE Greece 20
ETF (GREK) galloped ahead by as much as 24% in October before
losing a whopping 11% the last day of the month. It's ahead a
robust 50% over the past three months through Oct. 31.
New Chapter In Greek Story
"Greek (stocks) rose simply because the market had priced in a
complete collapse," Tony Fiorillo, president of Asset Management
Strategies with $50 million in assets under management in
Fishers, Ind., said. "When that didn't happen, there was a
'relief rebound' as market participants digested the new
Greece reached a deal Tuesday with international creditors to
undergo new austerity measures in exchange for more bailout
loans. The country's parliament has to vote to approve the
measures. Greece's Prime Minister Antonis Samaras says the
government will run out of money next month unless it gets a $40
billion loan from the European Union and International Monetary
Fund to dodge bankruptcy.
"None of the problems have really been fixed, but the odds of
a 'worst-case scenario' playing out in the near term have been
lowered," said David Houle, a founding member of Season
Investments in Colorado Springs, Colo., with $20 million in
assets under management.
Still, Greece's coalition government faces a no-win situation.
If they agree to austerity measures, worth $17.4 billion, the
public could riot and go on strike, contending more spending cuts
will deepen the country's recession.
Greece's economy will shrivel 6% this year and enter its sixth
year of recession next year, when it's estimated to shrink 4%,
the IMF said. The country's unemployment rate hit a record 25% in
July, with nearly one in two people in the 15-24 age group unable
to find work.
GREK's rally is merely a dead-cat bounce, in which heavily
oversold stocks snap back quickly only to roll over again,
investment strategists say.
"Ignore absolutely any bullish notion that austerity and or
fiscal responsibility are going to bail out an economy that has
been in recession for five years," said Tim Dyer, vice president
of Sage Capital Advisors with $150 million in assets under
management in La Jolla, Calif.
"There are too many Band-Aids patching up the PIIGS (Portugal,
Ireland, Italy, Greece and Spain) and there will be a day of
reckonings before it can all be rebuilt."
China ETF Fortunes Turn
Industrial and small-cap stocks led China to outpace emerging
China Industrials ETF (CHII) climbed 10.4% in October, while
MSCI China Small Cap Index (ECNS) rose 7.78%.
IShares FTSE China 25
Index Fund (FXI) -- the flagship ETF tracking the People's
Republic -- climbed 6.32% in the month. It tumbled into a bear
market, losing 22% peak to trough between February and June, on
expectations of slower growth. It's bounced 16% off its 52-week
low of 31.62 in June. It's trading above both its 50- and 200-day
moving averages, which is very bullish.
"It was inevitable that there would be a turnaround," said
Carl Delfeld, managing director of Chartwell Partners in Denver.
"Is it sustainable? Yes, primarily because the Shanghai market is
a pure momentum market."
China approved $157 billion in spending on infrastructure
projects. It has cut interest rates twice this year and lowered
banks' reserve requirements to boost economic growth. In
mid-November, the world's second-largest economy will usher in a
set of new leaders for the first time in decade. Investors are
hoping they will implement new economic drivers.
Solar energy's future grew ever dimmer in October.Market
Vectors Solar Energy ETF (KWT) tumbled 17.0% andGuggenheim Solar
(TAN) 12.47%. Solar energy stocks have suffered from a perfect
storm of China's excess and low-cost production flooding the
market, while the governments around the world cut subsidies
because of the economic slowdown.