Friday, October 31, 2008

Stocks mixed at end of gloomy month

Stocks fought to rise Friday morning, with investors struggling at the end of one of the worst months in Wall Street history.

The Dow Jones Industrial average (INDU) gained 0.5% around 45 minutes into the session. The Standard & Poor's 500 (SPX) index added a few points as well. The Nasdaq composite (COMP) lost a few points.

Stocks rallied Thursday as investors welcomed improved lending rates and a report showing that the economy shrank at a slower pace than expected in the third quarter.

But markets were mixed Friday, with blue chips managing to stabilize after a weak open, and technology shares remaining in the red.

A variety of economic reports were released, including readings on personal income and spending, regional manufacturing and consumer sentiment.

Oil prices slipped and the dollar gained versus other major currencies. Bond prices rallied, lowering the corresponding yields.

Stocks are up sharply this week: As of Thursday's close, the Dow is up 8.7%, the S&P 500 8.8% and the Nasdaq 8.6%.

But the advance did little to change October's status as one of Wall Street's worst ever. (For details, click here).

Despite the gains this week, investors pulled more money out of equity mutual funds than they did in the previous week, according to Trim Tabs. Withdrawals from stock mutual funds in the week ended Oct. 29 rose to 9.2 billion from 6.5 billion the previous week.

Other markets: The dollar gained against the euro and the yen.

U.S. light crude oil for December delivery fell 80 cents to $65.16 a barrel on the New York Mercantile Exchange.

Gasoline prices fell another 4.3 cents overnight, to a national average of $2.504 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 44th consecutive day that prices have decreased. During that time, prices have fallen by $1.35 a gallon, or 35%.

Lending rates: The credit market continued to improve, with Libor, the overnight bank-to-bank lending rate, falling to 0.41% from 0.73% Thursday, according to Dow Jones. The 3-month Libor fell to 3.03% from 3.19% Thursday. (Full story)

The TED spread, the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed slightly to 2.64% from 2.82% Thursday. The spread hit a record 4.65% earlier this month. The narrower the spread, the more willing banks are to lend to each other.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, slipped to 0.39% from 0.4% late Thursday, with investors preferring to take a small return on their money than risk the stock market.

Last month, the 3-month yield reached a 68-year low around 0% as investor panic hit its highest level.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.85% from 3.97% Thursday. Treasury prices and yields move in opposite directions.

A brutal month: Stocks have bounced back this week, finding some momentum at the end of a wretched October.

Yet, despite the recovery, October will go down in the history books as one of Wall Street's worst months of all time.

As of Thursday's close, the Dow had lost 1,670 points, the Dow's worst month ever, according to Stock Trader's Almanac info going back to 1901. On a percentage basis, the decline of 15.4% doesn't rank in the top ten.

The S&P 500 lost nearly 212 points, or 18.2% in the month, and is currently on track to post its worst month ever on a point basis and ninth worst ever on a percentage basis, going back to 1930.

The Nasdaq dropped 384 points, or 18.4% in October, tracking its seventh-worst month ever on a point basis and its sixth-worst month on a percentage basis, going back to its inception in 1971.

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