By Lenore Elle Hawkins via Iris.xyz
So much for the typical October strength in equities – a month in which the major US indices historically have gained ground 75% of the time. We’ve seen major index support levels broken while earnings beats have been smaller than we’ve seen over the past year with revenue and forward guidance giving investors jitters.
Over the summer and through September we warned that this earnings season would likely be a very bumpy ride as earnings would probably be decent, but guidance would not support the market’s multiples. Our concerns have proven warranted. Overall this earnings season the average company that has reported saw its shares fall 2% on its earnings reaction day – if this keeps up it will be the worst stock performance reaction on record since 2001.
How bad has it been?
On Wednesday, October 24, the Nasdaq had its worst daily drop since 2011, closing the day down over 10% from its recent highs and by the close of the trading day, the Dow Jones Industrial Average and the S&P 500 had lost all their gains for the year. If the market’s close in the red again Friday, the S&P 500 will have closed down 15 days during the month thus far, the most since 2012. The FAANGM stocks entered a bear market this week, losing 4.4% on Wednesday – the worst decline since August 2011. The Global MSCI All World Index hit a 14-month low, in bear market territory with a more than 20% decline since the January highs, losing 11% in October alone – the biggest decline since the financial crisis. This week only 4 of the 47 countries in the MSCI all country world index were above their 200-day moving average. Homebuilder stocks have fallen more than 40%