Wall Street Closes Best Month in Four Years

U.S. equity markets were lower on the last trading day of October as traders parsed a fresh round of economic data, but Wall Street still booked solid gains for the month.

The Dow Jones Industrial Average was down 92 points, or 0.52% to 17663. The S&P 500 fell 10 points, or 0.48% to 2079, while the Nasdaq Composite dropped 20 points, or 0.40%, to 5053.

The energy sector gained the most, while financials was the biggest laggard.

Today’s Markets

While Wall Street ended the week with red ink, for the month, the Dow gained more points in October than any other month in history. The blue-chip index added 1378 points, while the S&P climbed 159 points. By percentage, October was the best month for the Dow in four years.

Materials, technology, and energy looked to be the month’s best performers – they were also last quarter’s biggest losers -- while the utilities sector was on track for the title of October’s biggest laggard. The sector was the third quarter’s only winner.

Traders in the U.S. were still holding on to action from global central banks as they tried to figure out just exactly what it meant for interest rates in America. On Wednesday the Federal Reserve opted to keep rates steady, but altered language in its policy statement that left the door slightly more ajar for a rate hike at its December meeting.

Meanwhile, on Friday, the Bank of Japan followed the path of inaction, deciding to hold off on more stimulus while also lowering its economic-growth forecast from 1.7% to 1.2% for the fiscal year ending March. In addition, the Japanese central bank pushed back the timeframe in which it hopes to achieve a 2% inflation target from the middle of 2016 out as far as early 2017. Consumer prices in the nation, excluding food and energy, were said to have risen 0.9% in September from 0.8% the month prior.

“Not only has the Fed deferred tightening, but the ECB is sending a strong signal that it is contemplating expansionary measures by December 2015 and it is likely/inevitable that BoJ would at some stage increase both the size and pace of its own stimulus,” Larry Shover, chief investment strategist at Solutions Funds Group said.

The news was enough to send Japan’s Nikkei 0.78% higher, though other Asian markets declined. China’s Shanghai Composite was 0.14% lower, while Hong Kong’s Hang Seng slipped 0.79% on the session. The U.S. dollar was down 0.52% against the Japanese Yen in recent action.

“I think the USD/JPY elastic is stretched about a far as it can be, and while the BoJ can certainly get the Nikkei higher, it will struggle to weaken the Yen much. Indeed, I’m not convinced there is much point in trying to weaken it further. It would make more sense to focus on keeping it this cheap for long enough to help structural reform of Japan Inc. to progress,” Shover continued.

European equity markets followed suit as they looked to cap the session lower. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, slid 0.16%, the German Dax added 0.46%, while the French CAC 40 fell 0.12%, and the UK’s FTSE 100 dropped 0.54%.

Back in the U.S., personal income and spending data from the Commerce Department came in weaker than expected. Income and spending rose 0.1% during September, compared to expectations for a 0.2% bump higher.

Midwest manufacturing activity broke out of contraction territory in October as the Institute for Supply Management’s gauge jumped to 56.2 for the month from 48.7 in September. Wall Street had expected a reading of 49.

Finally, a final reading on consumer sentiment from the University of Michigan showed the gauge fell to 90 in October from a preliminary reading of 92.1. Wall Street had expected a gain to 92.5.

Third-quarter earnings reports from oil majors in the U.S. rolled out on Friday morning. ExxonMobil (NYSE:XOM) shares were higher after the oil and gas company reported a beat on both lines. Exxon’s CEO said the company continues to focus on business fundamentals and cost management in the face of low commodity prices. The company’s downstream and chemical units helped boost growth in the quarter. Still, the company’s earnings fell 47% from the same period a year ago.

Chevron (NYSE:CVX) also posted much better-than-expected results on both lines in the third quarter. The company said it earned $1.09 in profits per share for the quarter compared to expectations for 76 cents. Revenue came in at $34.32 billion compared to the $29.76 billion estimate. Shares jumped.

Still, the company said its earnings were 64% lower from the same time a year ago. It also said capex would be about 25% below the budget, while reductions are likely on tap for spending through 2018. Chevron added it will cut its workforce by between 6,000 and 7,000 employees.

Global oil prices, meanwhile, gained ground. U.S. crude was up 1.2% to $46.59 a barrel, while Brent, the international benchmark, added 1.2% to $49.42 a barrel.

Phil Flynn, senior market analyst at the PRICE Futures Group, said it’s been quite a year for energy companies as they’ve tried to balance cost cutting against an uncertain oil landscape.

“Still energy stocks rebounded this month, and may be showing hope that the cutbacks in oil production will lead to higher prices and better profitability in the future,” he said in a note. “Gone are the days of obscene profits, now you just have oil company executives shouting obscenities.”

Metals were mixed as gold declined 0.51% to $1,141 a troy ounce. Silver was unchanged at $15.55, while copper fell 0.24% to $2.31 a pound.