What’s trending in the market:

October Rebound: Traders took the opportunity of the set back that happened in the global stock markets in September, and started October with a strong demand for stocks. The Dip buying mentality started a strong market rebound during early October which helped set the sentiment for the month, as major indices were seen to break new record highs.

Fears of Stagflation: the persistent threat of high inflation is still a hot topic for investors, as data released in October regarding the Fed’s favorite gauge, the PCE. The price index rose 4.4% year-on-year, which is the fastest increase since 1991. However, with supply chain bottlenecks, higher energy prices and a slow in economic growth, the talk now is about Stagflation pushing in.

Corporate earnings: Earnings season kicked back in, with better than estimated earnings helped the market rally push even higher. Most of the big American corporations, such as Bank of America Corp, UnitedHealth group, various chipmakers all reported results and outlooks. Some giants, however, disappointed in results, such as Facebook, Apple and Amazon, but this didn’t weigh on the overall market sentiment. On another notes, profit margins reported were increasing despite the cost pressures arising.

Market performance and reactions:

Dow Jones Industrial Average

The Dow Jones Industrial Average started October with a positive note, rising from a low of 33,785towards a new high of 35,892 due to the dip buying mentality of investors at the beginning of October, and then the strong corporate earnings from the Dow’s biggest components, such as UnitedHealth group.

Nasdaq Composite

October started choppily for the Nasdaq, when the index reached a low of 14,181. However, the index rebounded as dip buyer focused on Tech stocks, mainly giants as Apple and Microsoft, and also chipmakers such as Nvidia, gaining a solid total of around 1300 points, to reach a new high of 15,504.

S&P 500

The S&P500 index started the month on a positive note as well, supported by the strong demand for stocks and the solid corporate earnings. The index shares components of both the Dow Jones and the Nasdaq, which in turns helps it gain more during uptrends. This was proved as the S&P500 snatched is biggest monthly increase since November 2020, as the index recorded a new all-time high of 4,608, a gain of around 330 points throughout the month.

VIX Index

The VIX, also known as a gauge of fear among market participants, has been trading around the same levels over the past couple of months as the economic recovery is taking place and investor’s confidence is boosting markets. However, with the global selloff in stocks, the index started rising again throughout September. But due to the bullish sentiment and the demand for equities during October, the VIX declined massively, reaching a low of 15.01, indicating that investors are confident with the stock market.  

Yield Curves

Yields on 10 year notes have continued their uptrend that have started throughout September, reaching a new high for the year of 1.68% in October. However, yields declined a bit towards the end of the month, reaching a level of 1.55%.

Year to date recap:

*As of October 31, 2021.

Conclusion:

October was highly anticipated by investors, as it followed a strong selloff globally and many viewed it as an opportunity to get into the market. The market rally that occurred didn’t disappoint, as most indices hit new record highs, and strong corporate earnings have further restored investors trust in the equities markets.

Key economic figures to be released in November, along with major events to be anticipated such as FOMC meeting which will tackle the next steps of the Fed’s program of reducing its asset purchases will all play a major role in shaping the direction equity markets will take towards the end of the year.

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The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice.  Any view expressed does not constitute a personal recommendation or solicitation to buy or sell.  The information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI.  Market data is derived from independent sources believed to be reliable, however CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.