Two faces of October: Crash-prone but ‘bear killer’

October 05 00:48 2015

October gets a bad rap on Wall Street. Blame it on stock market crashes in 1929, 1987 and 2008 that all happened to strike in October. But despite being known as a “jinx month,” October is also known as a “bear killer” — or the time of the year when weak stock markets stop going down, according to The Stock Trader’s Almanac.

The second point could prove to be a comfort to stock investors, who have been shaken recently by the first stock market “correction,” or 10%-plus drop, in four years. Adding to the sense of angst: increasingly wild price swings on a daily basis that have put a scare in even the most rational long-term investors. Barring a big market drop in the four weeks — the Standard & Poor’s 500 stock index is down around 9% from its May peak and far from a 20% drop or bear market — this October won’t need to be a bear killer. But Wall Street is hoping that the month lives up to its reputation as a downdraft “stopper” when the market turns up and never looks back from its recent trough on Aug. 25, when it was down 12.4% from its peak.

The worst October in history occurred after the 1987 crash, when the S&P 500 stock index plunged 21.8%, the Almanac says. But October has had big up and down days as well. Its worst day was on Oct. 19, 1987, when it plunged 20.5%, a record one-day percentage drop. On the positive side of the ledger, the broad U.S. stock index rallied 11.6% on Oct. 13, 2008, during a volatile period in the 2008 financial crisis.

This October, stocks will be driven by the third-quarter earnings season. And while Friday’s weak September jobs report and disappointing August factory report, coupled with Thursday’s two-year low reading on manufacturing, suggest the economy’s not firing on all cylinders, the earnings bar has been set very low. Wall Street analysts have been slashing profit estimates, which gives corporate America a good shot at topping lowered forecasts.