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October 2023 Review and Outlook

market intelligence desk
The Market Intelligence Desk Team Market Intelligence Desk

Executive summary:

  • U.S. equities fall for third straight month - Small & Microcaps worst performers
  • Oil falls after surging in Q3
  • Gold, Bitcoin and rates climb 
  • Global tension rising after terrorist attacks in Israel
  • Earnings improving but still mixed
  • Markets looking to rebound in historically strong November

U.S. equities declined in October, with both the S&P and Nasdaq dropping more than 10% from their July highs, entering correction territory. Big tech companies were generally lower, but they still helped the S&P outperform its equal-weight variant by 4.1%. Most sectors, including Energy, Airlines, Media, Homebuilders, Chemicals, Semiconductors, Machinery, and Banks, underperformed. On the other hand, Managed Care, Aerospace and Defense, Property and Casualty (P&C) insurers, Healthcare providers, Restaurants, and Utilities performed better.

The bond market similarly saw weakness in October, leading to a notable steepening of the yield curve. The 2-year Treasury yield saw a slight increase in yields, while 10-year and 30-year yields rose more than 30 basis points. The rise in yields hurt stock sentiment. The market had to adapt to the idea of a Federal Reserve that would maintain higher interest rates for an extended period. This was accompanied by positive economic surprises, such as strong retail sales and robust Q3 GDP. Factors like rising term premia, increasing Treasury issuance, quantitative tightening (QT), and softer foreign demand were also factors.

Moreover, the US dollar showed mixed performance, weakening against the euro but strengthening against the Japanese yen. Gold had a significant increase, with its best month since March, rising by 6.9% and briefly surpassing $2,000 per ounce. However, oil prices decreased from their year-to-date peak in late September, with WTI finishing the month down by 10.8%.

Geopolitical risks also came into focus following a terrorist attack on Israel by Hamas on October 7th, leading to the taking of numerous hostages, including US citizens. As we wait to see if the expected major ground invasion leads to a deeper regional conflict, we note the market historically tends to overlook geopolitical events, though a wider conflict could impact energy prices and inflation.

Finally, the third-quarter earnings season kicked off with more of a whimper than a bang. The blended earnings growth of ~2.8% is beating pre-season expectations, but the magnitude of those surprises has so far run below the 5-year average. The market has been punishing earnings misses more harshly than in previous quarters, while even earnings beats have been punished. Additionally, negative guidance factored into some of the price action. As technicals deteriorated and bearish sentiment remained, any potential rallies were quickly sold. November has seasonally been a good month for stocks, but it remains to be seen whether those positive trends will take hold into year-end.

US Indices Performance

Above percentages are in total return.

GICS Sector Performance

Percentages shown are Total Return.

Headline Inflation YoY:

Headline Inflation YoY
Headline Inflation YoY





Consumer Sentiment:

Consumer Sentiment

New Home Sales vs. Existing:

New Home Sales
Existing Home Sales







According to Factset, with 56% of S&P 500 companies reporting Q3 earnings, 80% have reported a positive EPS surprise, while 46% have reported a positive revenue surprise. The average reported EPS beat has been 7.8%, with an average revenue rate of just under 1.1%. The 80% EPS beat level is above both the 5-year (78%) and 10-year (74%) averages. Moreover, the 7.8% EPS surprise is below the 5-year average of 8.5% but above the 10-year average of 6.6%. It should be noted that the historical averages are from actual results from the entire index, not the same percentage to date. 

Consumer Discretionary stocks have once again reported the largest EPS upside with an average beat of 14.2%, distantly followed by Financials and Communications companies, which have beat by an average of 9.7%. Top-line beats have been led by Real Estate companies reporting 3.7%, followed by Energy at 2.3%.

On the growth front, 63% of companies have reported revenue growth, with 33% declining and 4% flat, with an average growth rate of 1.6%. Energy companies have seen the biggest drop, with only 25% reporting revenue growth, with an average decline of (-15.5%). Materials similarly saw weakness this quarter, with 31% reporting revenue growth, with an average decline of (-10.3%). On the flip side, Real Estate had the highest percentage of companies with revenue growth, as 85% saw improvement, followed by Consumer Staples with 79%. Despite only 68% of Consumer Discretionary companies reporting growth, they had the highest average growth level at 9.6%. Similarly, Consumer Discretionary stocks saw average EPS growth of 48.8%, followed by Communications at 35.0%. Alternatively, Energy stocks saw an average EPS decline of (-38.2%), followed by Health Care at (-19.3%).  

The forward 12-month PE for the S&P 500 is 18.0, which is below the five-year average (18.7) and 10-year average (17.5), according to FactSet.

In terms of 2-day price action following earnings prints, only Materials and Utilities have seen positive results, with an average stock gain of 0.2% and 0.1%, respectively. Alternatively, Health Care and Consumer Discretionary stocks have seen significant pressure in the two days following their prints, with an average decline of (-3.3%) and (-3.0%) respectively. Industrials and Communications were essentially flat after falling (-0.2%) and (-0.1%), while the remaining sectors fell between (1.0% - 1.6%).

Price Reaction vs. Growth


Yield Curve:

Yield Curve

Fed Expectations:

Fed Expectations

Chart of the month: 

Hope you have some funds squirreled away if you drink OJ! 

Orange Juice Futures

Looking Ahead:

November will see the remainder of Q3 ’23 earnings season, as well as a slew of key economic data, including Jobless Claims, Change in NFP, CPI, GDP, and Consumer Sentiment. November has been the best-performing month dating back to 1970, with an average appreciation of 1.9%. Stocks have now fallen in three consecutive months as bond yields continued their upward march in October. However, 10-year US Treasury yields stalled at the closely watched 5% level at about mid-month. Any market rally into year-end would likely require that yields don’t move much higher from here.   

Economic Calendar

The information contained herein is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. All information contained herein is obtained by Nasdaq from sources believed by Nasdaq to be accurate and reliable. However, all information is provided “as is” without warranty of any kind. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

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