The month of October has traditionally been a notorious stretch for equities, described as the “jinx month” for stocks, per the Stock Trader’s Almanac. After all, some of the worst market crashes took place in the month. There were mega “crashes in 1929 and 1987.”
In fact, the great crash on Oct 19, 1987, saw the Dow plunge 22.6% in a single day, which is arguably the worst one-day decline. The other black days, of course, were “the 554-point drop on October 27, 1997, back-to-back massacres in 1978 and 1979, Friday the 13th in 1989, and the meltdown in 2008,” per the Almanac.
This time around as well, October has maintained its reputation, at least during the first two trading sessions. The Dow slumped about 840 points, or 3.1%, over the past two sessions, while the broader S&P 500 dropped more than 1% in successive sessions.
Weak employment and manufacturing data dragged down stocks. The ongoing U.S.-China trade war had a negative impact on both job additions and factory output. Per the ADP report, the nation’s private-sector companies added a modest 135,000 jobs in September, a tell-tale sign that hiring is slowing down along with the broader economy. Analysts expected job addition of 152,000.
ADP trimmed the number of new jobs created in August from an earlier 195,000 to 157,000. Needless to say, ADP is the largest processor of paychecks for a number of companies and millions of employees.
American manufacturers, in the meantime, saw their largest contraction last month since the 2007-2009 great recession. The ISM’s manufacturing index came in at 47.8% for September, declining from 49.1% in August and marking the lowest level since June 2009.
By the way, adding to trade concerns was the United States winning approval of imposing tariffs on $7.5 billion worth of European products over illegal EU subsidies handed to Airbus, thereby increasing the threat of a transatlantic trade war.
But, investors should hold their nerves. This is because a bad start to October mostly signals good times for the rest of the year. According to Bespoke Investment Group, whenever the broader S&P 500 declined at least 1% in the first trading day in October, the primary index gained an average 3.75% for the rest of October.
In fact, the index continued its winning streak and finished in the green for the remaining three months. After all, traditionally, the S&P 500 had registered an average gain of 7.3% for the fourth quarter. Bespoke added that “bulls would certainly take a 1% decline today if it meant 7%+ gains through year-end compared to the average gain of 2.43% for all years.”
5 Best Stocks to Buy for the Rest of the Year
With the stock market expected to bounce back for the rest of the year after an initial dip in the beginning of October, investing in fundamentally sound stocks that are poised to gain in the near term seems judicious. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) and a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Digital Turbine, Inc. APPS provides media and mobile communication products and solutions for mobile operators, application developers, device original equipment manufacturers (OEMs), and other third parties. The Zacks Consensus Estimate for its current-year earnings has moved 42.9% north over the past 60 days. The company’s expected earnings growth rate for the current year is 150% compared with the Internet - Software industry’s projected rally of 9.5%.
Funko, Inc. FNKO, a pop culture consumer products company, designs, sources, and distributes licensed pop culture products. The Zacks Consensus Estimate for its current-year earnings has moved 6.1% north over the past 60 days. The company’s expected earnings growth rate for the current year is 47.6% compared with the Consumer Products - Discretionary industry’s estimated rise of 2%.
HMS Holdings Corp. HMSY provides cost-containment solutions in the United States healthcare marketplace. The Zacks Consensus Estimate for its current-year earnings has moved 6.6% up over the past 60 days. The company’s expected earnings growth rate for the current year is 25% compared with the Medical Info Systems industry’s expected rally of 8%.
Keysight Technologies, Inc. KEYS provides electronic design and test solutions to commercial communications, networking, aerospace, defense and government, automotive, energy, semiconductor, and electronic industries in the Americas. The Zacks Consensus Estimate for its current-year earnings has climbed 8.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 41.7% compared with the Electronics - Measuring Instruments industry’s estimated decline of 16%.
Kinross Gold Corporation KGC engages in the acquisition, exploration, and development of gold properties in the United States. The Zacks Consensus Estimate for its current-year earnings has moved 17.4% north over the past 60 days. The company’s expected earnings growth rate for the current year is 170% compared with the Medical Info Systems industry’s projected rally of 18.1%.
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