The stock market closed out a horrendous October, its worst month in 21 years, with a big advance Friday as more investors took chances on stocks turned into bargains by waves of intense selling.
The advance – which gave the market its first back-to-back gains in more than a month – fed hopes that Wall Street has indeed found a bottom.
The Dow Jones industrials rose 144 points on the day but ended the month down 14.1 percent, while the broader Standard & Poor's 500 index lost 16.9 percent during October as the stock market fell victim to investors' anguish over frozen credit markets and what looked like an inevitable recession.
But the month ended on a far more upbeat note than anyone might have expected at the height of investors' despair just weeks ago. The Dow was up 11.3 percent for the week, its best weekly performance in 34 years, while the S&P 500 index rose 10.5 percent – a sign of stability that followed a growing sense that the series of government moves to unlock the credit markets would indeed help the economy move toward recovery.
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Investors who have become used to bad economic news dealt calmly Friday with data showing a drop in consumer spending. Another reason for the advance: Mutual funds that dumped stocks furiously as the end of their fiscal year approached were finished with their selling.
While the market capped a terrible month with a strong week, it likely will need to put the presidential election next week behind it and focus on the October employment report due next Friday before committing to a direction. The jobs report should provide some insight into how long and how severe the economic downturn could be.
The market is “settling into a little bit of a holding pattern” ahead of the election and jobs report, said Craig Peckham, market strategist at Jefferies & Co. “The fear level has clearly subsided, but there's still a pervasive tone of unease.”
The Dow rose 144.32, or 1.57 percent, to 9,325.01 after rising as much as 274 and falling 62.
Broader stock indicators also advanced. The S&P 500 index rose 14.66, or 1.54 percent, to 968.75, while the Nasdaq composite index rose 22.43, or 1.32 percent, to 1,720.95.
Friday's session featured advances by financial, industrial and consumer discretionary names. Financial stocks had been beaten down earlier in the month amid worries about the effects of the frozen credit markets. JP Morgan Chase & Co. rose 9.7 percent, while freight railroad Union Pacific Corp. rose 4.9 percent and J.C. Penney Co. jumped 11.3 percent.
The Dow's 11.3 percent gain for the week – mostly from an 889-point surge on Tuesday before the Federal Reserve's second interest rate cut of the month on Wednesday – gave the blue chips their best weekly performance since Oct. 11, 1974.
Despite a stronger finish to the month, the Dow still remains down 29.7 percent from its Oct. 9, 2007, record close of 14,164.53. It has lost 18.4 percent since the Sept. 15 bankruptcy filing of Lehman Brothers Holdings Inc., the event that led to the near-paralysis of the credit markets and a series of dramatic government steps aimed at stabilizing a faltering economy.
The S&P 500 index is down 38.1 percent from its October 2007 peak, while the Nasdaq is down 39.8 percent.