The Dow and S&P 500 ended October with their first monthly declines since April, while Halloween brought more market scares than treats. A wave of tech-sector selling on Thursday pulled down the S&P 500, and the Nasdaq Composite posted its steepest one-day drop since early September. Analysts pointed to various factors behind the slide, including cautious guidance from Big Tech and potential pre-election anxiety. Thomas Martin, senior portfolio manager at Globalt Investments, noted that investors seem to be zeroing in on earnings reports from the “Magnificent Seven” tech giants, even though he felt most of their results were solid. The Nasdaq Composite dropped 2.8%, its sharpest one-day percentage drop since Sept. 3, while tech sectors led the S&P 500 down 1.9%. Meanwhile, the Dow Jones Industrial Average, more weighted toward cyclical sectors, lost 0.9%. The month marked the first declines since April for the S&P 500 and Dow and the first since July for the Nasdaq. The Invesco QQQ Trust, which tracks the Nasdaq-100, dropped 2.5%. Microsoft and Meta Platforms fell 6.1% and 4.4%, respectively, following strong earnings reports that were overshadowed by conservative revenue outlooks and continuing high costs linked to artificial intelligence. Louis Navellier, founder of Navellier & Associates, explained that tech companies with high price-to-earnings ratios must beat expectations and provide robust guidance, a situation he describes as “priced for perfection.” Navellier also pointed to rising uncertainty around the upcoming election, as reflected in a jump in the Cboe Volatility Index, which rose above its historical average. Despite Thursday’s losses, Microsoft remains up more than 8% this year, Meta has gained over 60%, and Nvidia is up nearly 170%. Still, rising Treasury yields—now around 4.3% on the 10-year note, up from 3.6% in mid-September—have intensified pressure on high-valuation tech stocks, as higher yields reduce the present value of future earnings. Jonathan Krinsky, chief market technician at BTIG, noted that the S&P 500 has broken its uptrend from the August lows. He previously warned of market vulnerability in mid-October, and now suggests that the next key support level could be around 5,500-5,650.

The U.S. stock market is gearing up for its historically strongest six-month period, November through April, following impressive gains over the summer months. Traditionally, investors adhere to the “sell in May and go away” adage, but this year’s performance defied that trend. Yet with rising Treasury yields and the looming presidential election, many wonder if the market rally has enough fuel to keep running. Historically, the November-April period is the best six-month stretch for stocks. Since 1945, the S&P 500 has averaged nearly a 7% return in this window compared to only 2% from May to October, according to Sam Stovall, CFRA Research’s chief investment strategist. This year, however, has been an outlier. Since April 30, the S&P 500 has surged more than 16%, setting up for the biggest May-October gain since 2009, on top of the previous November-April’s 20% gain. This two-part rally has raised questions about whether the market is due for a slowdown, yet history suggests the momentum could continue. Stovall notes that previous strong gains from May to October have often led to even stronger performance in the following November-April period. In fact, in the 12 instances since 1945 when the S&P 500 rose over 10% from May to October, it went on to climb an average of 13% in the subsequent November-April period. Additionally, in cases where double-digit gains occurred in both periods, stocks stayed on an upward trend in four out of five subsequent periods, with an average gain of 11%. Beyond the large-cap S&P 500, the November-April stretch has also been strong for smaller stocks and international markets, including the Russell 2000, MSCI EAFE, and MSCI Emerging Markets indices. However, election-related concerns and economic pressures are adding uncertainty. Recently, rising Treasury yields have triggered market volatility, with the yield on the 10-year note trading above 4.3%, a level that has challenged stocks in recent months. “With stocks up 23% year-to-date, many are questioning the remaining upside,” commented José Torres, senior economist at Interactive Brokers. Although this year has seen impressive growth, he pointed out that it trails some recent years like 2021, 2019, and 2013, each of which saw returns ranging from 24% to 30% in the first 10 months. Torres added that for stocks to keep their upward momentum, factors like favorable election outcomes, calmer interest rates, and strong AI-driven earnings could play a role. Sam Stovall is still optimistic, emphasizing that the market has historically risen through periods of uncertainty, driven by potential interest rate cuts and solid tech earnings. U.S. stocks closed mostly higher on Tuesday, with the Nasdaq up 0.8% for its 28th record close of the year. Meanwhile, the S&P 500 edged up 0.2%, while the Dow Jones slipped 0.4%.