Stocks facing yet another scary October

Caterpillar, 3M earnings add to investor worries

October is living up to its reputation on Wall Street as a month known for wild swings. The broad U.S. stock market dropped for the 12th time in the past 14 days Tuesday, putting it on track for its worst October since the 2008 financial crisis. The market, as measured by the Standard & Poor’s 500 stock index, has turned volatile since hitting a record high Sept. 20, taking a defensive turn. Investor psychology has become more cautious amid a growing list of risks that are putting a strain on the 9year-old bull market. Those risks now include worries about corporate earnings after two industrial giants, Caterpillar and 3M, issued outlooks that worried investors, sending shares tumbling early Tuesday. That news added to existing investor anxieties caused by China’s slowing economy, global trade disputes and rising interest rates in the U.S., which makes borrowing more expensive for companies and shoppers. “Markets remain shrouded in a thick blanket of risk,” said Stephen Innes, head of trading at Oanda, a currency trading firm. ❚ Whipsawed: Investors got whipsawed Tuesday, with the Dow Jones industrial average tumbling nearly 550 points, or more than 2 percent, at one point before clawing back some of its losses to close 126 points, or 0.5 percent, lower at 25,191. The technologystock packed Nasdaq composite again took the brunt of the losses, briefly dipping into “correction” territory, or more than 10 percent below its record high in August, before closing 0.4 percent lower at 7438, or 8.3 percent off its recent high. October has a history of scary returns and elevated volatility. The 1929 and 1987 stock market crashes occurred in the 10th month of the year, as did the nearly 17 percent swoon in 2008 when the U.S. banking system was on the verge of collapse, according to S&P Dow Jones Indices data. And no month has had more daily price moves of 1 percent or more in either direction since 1950, LPL Research data show. The S&P 500 is down 5.9 percent so far this October. But not all the history is bad. In the past 20 years, October has been the best month for the Dow, posting average gains of 2.5 percent and finishing higher 75 percent of the time, according to Bespoke Investment Group. ❚ Hopeful signs: In one sign of hope, the S&P 500 closed at 2741, above the key 2700 level that marked its low this month and served as a sort of floor for the market. Some Wall Street pros say the selling has been overdone and that buyers will reappear and push stocks back up. “The (market) is oversold,” noted Mark Arbeter, president of Arbeter Investments, adding stocks could be setting up for a bullish rebound. Another positive sign is the market has become considerably cheaper than it was in late January when investors’ optimism was far more ebullient. The S&P 500 is now trading at 17.7 times its expected earnings over the next four quarters, down 4 points from its 21.7 price-to-earnings multiple at the market’s 2018 high Jan. 26, earnings tracker Refinitiv says. ❚ Small stocks suffer: The Russell 2000, an index of small-company stocks that fell 0.8 percent Tuesday, moved deeper into correction territory and was down 12.3 percent below its August record.

EPA-EFE Investors have seen the stock market fall 12 of the past 14 days.