Market Review

Monthly Market Review

Data as of October 31, 2019

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U.S. Stocks

Stocks recovered from a poor start to the month and recorded solid gains in October, helping lift the large‑cap S&P 500 Index to record highs. The Dow Jones Industrial Average and the Nasdaq Composite Index moved within 1% of their summer peaks, while the small‑ and mid‑cap benchmarks gained ground but were further off their record levels hit in August 2018. Health care shares performed best within the S&P 500, helped by better‑than‑expected earnings from Merck, Pfizer, and UnitedHealth Group. Energy stocks fared worst as oil prices fell on oversupply and global growth concerns. Utilities, consumer staples, and real estate shares also recorded small losses.

Slowdown Worries Hamper Sentiment Early in Month

Further evidence of a U.S. economic slowdown weighed heavily on sentiment as the month began. Stocks fell sharply after the Institute for Supply Management (ISM) reported that its gauge of U.S. manufacturing activity had fallen further into contraction territory and reached its lowest level since the Great Recession of 2008–2009. The ISM’s gauge of service sector activity, while still indicating expansion, fell to its lowest level in three years. Stocks bounced back and had their best day of the month on October 4, however, after recession fears were calmed by encouraging monthly payrolls data. The Labor Department reported that employers had continued to add jobs at a decent pace (136,000) in September and revised the previous month’s payroll gains higher.

Easing Trade Tensions Help Stocks Rebound

Signs of a cooling in U.S.‑China trade tensions also appeared to help the market regain momentum. Shares rallied sharply on October 10, following a report in The New York Times that the U.S. was preparing to license new sales of goods to Chinese telecommunications giant Huawei Technologies. Bloomberg then reported that U.S. negotiators were open to a partial deal that would include a currency pact first discussed in February. Just before markets closed on October 11, President Donald Trump announced that the two sides had reached a “phase one” deal in which the U.S. would suspend planned tariff increases on October 15 in return for increased purchases of U.S. agricultural goods by China, along with unspecified provisions regarding protection of intellectual property and access for financial services firms.

Third‑quarter earnings reports took center stage as the month progressed and seemed to give another modest overall lift to stocks. Based on reports released by month‑end, FactSet and Thomson Reuters estimate that profits for the S&P 500 as a whole declined slightly for the third consecutive quarter, extending the first earnings recession since 2016. Slightly more companies than usual had topped analysts’ consensus estimates, however, and investors seemed generally reassured that global economic weakness had not taken a larger toll on corporations’ bottom lines. While rising wage pressures and input costs seemed to be hurting profit margins, analysts continued to expect a return to earnings growth in 2020.

Total Returns

 

October 

Year-to-Date

Dow Jones Industrial Average

0.59%

18.19%

S&P 500 Index

2.17

23.16

Nasdaq Composite Index

3.66

24.97

S&P MidCap 400 Index

1.13

19.20

Russell 2000 Index

2.63

17.18

Past performance is not a reliable indicator of future performance.
Note: Returns are for the periods ended October 31, 2019. The returns include dividends based on data supplied by third‑party provider RIMES and compiled by T. Rowe Price, except for the Nasdaq Composite Index, whose return is principal only.
Sources: Standard & Poor’s, LSE Group. See Additional Disclosures.

T. Rowe Price Economists Anticipate Rebound in Global Growth

The economic data released late in October were mixed, and the International Monetary Fund and other observers continued to lower their growth forecasts for the global economy. T. Rowe Price’s global economics team currently expects that global growth will rebound over the next few quarters, however. Recent monetary policy loosening by the Federal Reserve and other major central banks appears to be easing global financial conditions, and some leading economic indicators have turned positive. Recent developments also suggest that the worst‑case scenario for a U.S.‑China trade war will be averted. Nevertheless, many uncertainties remain, highlighting the importance of careful stock selection, particularly in the months ahead.

Additional Disclosures

Copyright 2019 FactSet. All Rights Reserved.

J.P. Morgan. Information has been obtained from sources believed to be reliable, but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2019, J.P. Morgan Chase & Co. All rights reserved.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2019. FTSE Russell is a trading name of certain of the LSE Group companies. “Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

The S&P 500 Index and S&P MidCap 400 Index are products of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and have been licensed for use by T. Rowe Price. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); T. Rowe Price is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index and S&P MidCap 400 Index.

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This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor, and T. Rowe Price Associates, Inc., investment advisor.

© 2019 T. Rowe Price. All rights reserved. T. Rowe Price, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

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