Stock Market Archives - Stock Sector


Stock SectorOctober 19, 20185min3

Greater China markets made a strong comeback on Friday afternoon, following a series of measures announced by Chinese leaders to support the struggling stock market.

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After a turbulent morning following weaker-than-expected GDP data and a sharp sell-off the day before, shares in the mainland rebounded, rising more than 2 percent.

By market close, the Shanghai composite and the Shenzhen composite had surged 2.58 percent, while the Nasdaq-style Chinext index went up 3.18 percent. Hong Kong’s Hang Seng index rose 0.51 percent as at 3.21 p.m. HK/SIN.

Thursday had seen a sell-off in the mainland Chinese markets, with the Shanghai index seeing its lowest point since November 2014.

Investors had also been jittery after China’s GDP numbers were released, showing that economic growth slowed to 6.5 percent year-over-year in the third quarter. That missed expectations for 6.6 percent growth, according to analysts polled by Reuters. Friday’s print was the weakest pace since the first quarter of 2009.

But on Friday morning, the heads of the People’s Bank of China, the Securities Regulatory Commission and the Banking and Insurance Regulatory Commission all issued statements expressing support for the stock market and positive economic fundamentals.

China’s securities regulator unveiled a series of measures to aid the country’s struggling stock market, which had been on a downward trajectory all year. It said it would encourage funds to help ease liquidity difficulties at listed companies, and would support share buy-backs.

However, Hao Hong, head of research and chief strategist at Bank of Communications (International), said China was already poised for an “oversold rebound” — even without the supportive comments from the regulators.

“The market is oversold anyway, the market is so oversold it’s not funny,” he told CNBC on the phone.

“If you want to make a speech to support the stock market now may be the right time,” Hong said, noting that would give “more bang for your buck.”

The Commonwealth Bank of Australia, meanwhile, said in an afternoon note that the GDP data released on Friday is “likely to encourage the Chinese authorities to keep macro-economic policy settings supportive.”

“We expect monetary policy to remain ‘prudent’ and fiscal policy to remain ‘more proactive’,” the note said.

— CNBC’s Huileng Tan, Yen Nee Lee, Evelyn Cheng and Reuters contributed to the story.

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Stock SectorOctober 19, 20185min5

Berkshire Hathaway chairman and CEO Warren Buffett enjoys an ice cream treat from Dairy Queen before the Berkshire Hathaway annual meeting in Omaha, Nebraska.Reuters/Rick Wilking

  • The US stock market has faced a heavy selling over the past few weeks amid fears surrounding rising interest rates and escalating trade tensions.
  • Warren Buffett tells investors to buy, hold, and don’t watch too closely when the stock market sells off.
  • Investors on Robinhood, which is popular among younger traders, seem to be following Buffett’s advice as a majority of the most-popular stocks on the trading app have seen investor interest increase over the past three weeks.

The US stock market has faced a heavy selling during the month of October amid fears over rising interest rates and escalating trade tensions. At its lows, the S&P 500 had lost 7% this month, but it seems investors on the free-trading app Robinhood are heeding the advice of the legendary investor Warren Buffett, who always tells investors to keep clam and focus on the long term. 

Don’t watch the market closely,” Buffett told CNBC when asked about advice for investors who were worried about their retirement savings during a wild bout of market volatility back in 2016.

“If they’re trying to buy and sell stocks, and worry when they go down a little bit … and think they should maybe sell them when they go up, they’re not going to have very good results.”

And investors on Robinhood, a free-trading platform popular among younger traders, seem to be heeding Buffett’s buy-and-hold strategy during the recent market sell-off.

According to data tracked by Business Insider, a majority of the most-popular stocks on Robinhood have seen the number of investors increase over the past three weeks, with only nine out of the 30 most-popular names losing holders on the app.

Two cannabis stocks, Cronos Group and Canopy Growth saw investors loading up on shares ahead of Canada becoming the second country in the world to legalize marijuana, with net investor additions at 25,654 (+19.6%) and 21,077 (+28%) respectively.

On the flip side, AMD saw the biggest drop in the number of investors with a net of 13,677, or 8.1% investors, selling their holdings since September 27 following word that rival Intel could ramp up its chip production sooner than expected.

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Stock SectorOctober 18, 20187min10

CHAPEL HILL, N.C. — The Dow Jones Industrial Average could drop more than 5,700 points in Friday’s trading session.

Impossible, you say?

Think again. On Oct. 19, 1987 — 31 years ago today — the Dow

DJIA, -1.27%

 plunged 22.6%. It was the worst stock-market crash in U.S. history. An equivalent percentage drop today would cause the Dow to skid more than 5,700 points.

To be sure, just because the stock market could suffer a similar fate doesn’t mean it is likely. But most investors don’t even acknowledge that it’s possible.

They’re kidding themselves.

Consider a study conducted several years ago called “Institutional Investors and Stock Market Volatility” by Xavier Gabaix, a finance professor at Harvard University, and three scientists at Boston University’s Center for Polymer Studies: H. Eugene Stanley; Parameswaran Gopikrishnan, and Vasiliki Plerou. After analyzing decades of stock-market history, in both the U.S. and other countries, the authors devised a formula that predicts the frequency of stock-market crashes over long periods of time.

A single-session drop as big as 1987’s is predicted by their formula to occur once every 104 years, on average. Note carefully that this doesn’t mean a crash this big will occur every 104 years. This instead will be their average frequency over long periods.

So it’s possible that we will not experience another 1987-magnitude crash in our lifetimes — or that another will occur today.

Read: Don’t sweat a stock-market selloff with midterms around the corner, says strategist

What causes the market to crash? The researchers argue that it’s because all markets, to a more or less similar degree, are dominated by their largest investors. And when those investors simultaneously want to get out of the market, for whatever reason, the market will crash.

The researchers therefore believe we’re kidding ourselves if we think that regulatory reforms put in place since the 1987 crash will be able to prevent another crash. Consider circuit breakers, trading halts and the like, for example. However effective they might be on the New York Stock Exchange and the Nasdaq Stock Market — and many experts have serious doubts — they will be powerless to prevent the sales of U.S. stocks that are listed on foreign exchanges or via the short sale of stock index futures contracts or options.

The markets are globally interconnected and largely unregulated, in other words.

By the way, the researchers’ formula can be used to predict the frequency of crashes of any magnitude. Less severe drops will, not surprisingly, be more frequent. A 5% daily drop is forecasted to occur 61 times over the next century, for example, while a 10% daily drop should occur eight times over the next 100 years.

That works out to a 5% daily drop every 1.6 years, on average, and a 10% drop every 13 years.

I need not remind you that it’s actually been seven years — since August 2011 — since we suffered from a 5% daily decline, and over 30 years since the market endured a 10% daily decline.

The stock market over the last couple of decades has been unusually calm, in other words. It might not seem that way, especially over the last week as the Dow has suffered several days of triple-digit declines, including 327 points on Thursday. But we’ve been spoiled by the market’s relative tranquility.

To George Santayana’s famous line, those who cannot remember the past are condemned to repeat it. Don’t wait for another 1987-magnitude crash to learn this lesson the hard way.

For more information, including descriptions of the Hulbert Sentiment Indices, go to The Hulbert Financial Digest or email

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Stock SectorOctober 18, 20188min12

NEW YORK — U.S. stocks slumped again Thursday as investors continued to sell shares of technology and internet companies, industrials, and companies that rely on consumer spending.

Several industrial companies tumbled after releasing weak quarterly reports, and European stocks also fell as European Union leaders criticized Italy’s spending plans.

At the start of trading, stocks took small losses as bond prices fell and interest rates spiked. While the gain in interest rates didn’t last, stocks turned lower late in the morning, and by the end of the day they had wiped away most of their big rally from Tuesday.

Stocks have skidded over the last two weeks, and there are signs investors are worried about future economic growth. The S&P 500 has fallen 5.5 percent in volatile trading since Oct. 3, and technology, industrial and energy companies have taken some of the biggest losses. Those companies tend to do better when the economy is growing more quickly and consumers and businesses have more money to spend.

“If uncertainty starts to creep in around trade or growth, that could be a risk to the recovery in … corporate spending,” said Jill Carey Hall, senior U.S. equity strategist for Bank of America Merrill Lynch. She said investors will monitor company reports over the next few weeks to learn about their business forecasts and plans.

European leaders expressed concern about the Italian government’s proposal to increase spending and widen its budget deficit. European Union budget chief Pierre Moscovici told Italy’s economic minister that the new government’s plans make it unlikely that Italy will be able to reduce its public debt to levels agreed upon by EU countries.

More: Stock market: How to avoid investment mistakes when Dow swings up and down

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More: Stock market rebounds, powered by earnings that ease fears over health of economy

The S&P 500 index shed 40.43 points, or 1.4 percent, to 2,768.78. The Dow Jones Industrial Average lost 327.23 points, or 1.3 percent, to 25,379.45. It was down as much as 470 earlier.

The Nasdaq composite sank 157.56 points, or 2.1 percent, to 7,485.14. The Russell 2000 index of smaller-company stocks declined 28.85 points, or 1.8 percent, to 1,560.75.

Among industrial companies, aircraft maker Textron slid 11.3 percent to $57.49 after its profit and sales fell far short of analyst forecasts. The company said its aerospace and defense business and its industrial business both weakened. Tool and diagnostic equipment company Snap-on lost 9.6 percent to $151.47 after it posted lower revenue than analysts expected.

Industrial and basic materials companies have taken bigger losses than any other part of the market over the last month, and one reason is that investors feel they are especially vulnerable in the ongoing trade dispute between the U.S. and China. They’re already dealing with tariffs on imported steel and aluminum, which have increased their costs and can also hurt sales, and if the global economy slows, then manufacturing and construction could slow down, too.

Amazon pulled retailers lower as it lost 3.3 percent to $1,770.72. Video game maker Activision Blizzard lost 8.3 percent to $71.81 after it announced early sales numbers from “Call of Duty: Black Ops 4,” and Apple fell 2.3 percent to $216.02.

Those are some of the sectors that have fared the worst recently. The stocks that have held up the best include utility and household products companies. They don’t depend as much on economic growth, as consumers are likely to use about the same amount of electricity and buy the same amount of toilet paper or cereal regardless of the state of the economy.

The recent gains for those stocks is notable because the market’s slump began when interest rates started rising quickly. Defensive stocks often struggle when interest rates are rising. The companies are known for paying big dividends, similar to bonds, so when rates rise, investors often sell those stocks and buy bonds instead.

Carey Hall said that if the economy keeps growing and interest rates rise, investors might not want to choose between growth-oriented stocks or defensive ones. She said companies in the middle might do best, including some industrials, banks and older technology companies. Those companies could perform still benefit if the economy keeps growing, but they also have enough financial flexibility to raise their dividends to outpace rising interest rates.

Bond prices ended slightly lower. The yield on the 10-year Treasury note 3.18 percent from 3.17 percent.

In Europe, Italy’s FTSE MIB dropped 1.9 percent and Italian government bond prices dropped again, sending yields to their highest levels since February of 2014. Germany’s DAX dipped 1.1 percent. The French CAC 40 lost 0.5 percent and the FTSE 100 in Britain slipped 0.4 percent.

Japan’s Nikkei 225 index sank 0.8 percent and the Kospi in South Korea lost 0.9 percent. Hong Kong’s Hang Seng index was little changed, and remained near its lowest level since May 2017.

The price of U.S. crude oil lost 1.6 percent to $68.65 per barrel in New York, its lowest in a month. Brent crude, the international standard, lost 0.9 percent to $79.29 per barrel in London.

Wholesale gasoline fell 1.4 percent to $1.89 a gallon. Heating oil slid 0.7 percent to $2.29 a gallon. Natural gas dropped 3.7 percent to $3.20 per 1,000 cubic feet.

Gold rose 0.2 percent to $1,230.10 an ounce. Silver fell 0.4 percent to $14.60 an ounce. Copper lost 1.1 percent to $2.75 a pound.

The dollar dipped to 112.20 yen from 112.49 yen. The euro fell to $1.1465 from $1.1507.

AP Markets Writer Marley Jay can be reached on Twitter.

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Stock SectorOctober 18, 20185min8

The stock market remains in the grip of the bears Thursday, with all major benchmarks poised for another big daily drop. But strategists like Ryan Detrick at LPL Research were sanguine about the retreat given the market’s tendency to save the best for last during midterm years.

“On average, the S&P 500 actually has been negative year to date in early October during a midterm year,” said Detrick, in a note. “Importantly, markets can be jittery ahead of major events like elections. Once the uncertainty is resolved in November, solid fundamentals and strong seasonals could take over for a nice year-end rally.”

Read: Will midterm elections sink the stock market? Here’s what history says

The senior market strategist also said that midterm years are always among the most turbulent and gains tend to be concentrated in the final months as illustrated in the chart below.

LPL Research

As for the market’s dismal performance the past couple of weeks, Detrick believes stocks will likely remain under pressure in the near term as they had done in 2016 when the S&P 500 slid for nine straight sessions before the election in November.

However, not all analysts are confident the midterm pattern will play out this year.

See: Investors banking on a stock market rally after midterms should take a look at this chart

Nonetheless, given that earnings continue to come in better than expected and there are no immediate signs of a recession, the market is expected to regain its composure once it gets past the historically volatile October, according to Detrick.

Stocks fell sharply Thursday, with the S&P 500

SPX, -1.44%

 off 1.4% and the Dow Jones Industrial Average

DJIA, -1.27%

 on track for a fall of more than 300 points after declining more than 400 at its session low. The S&P 500 is off 4.9% in October, trimming its year-to-date gain to 3.6%, while the Dow is down 4.1% in October, leaving it with a 2.7% year-to-date advance.

U.S. companies are projected to report quarterly earnings growth of nearly 23%, making it the third quarter for earnings to rise over 20%, according to data from FactSet.

Meanwhile, Dubravko Lakos-Bujas, JPMorgan Chase & Co.’s head of equity strategy, believes the market’s woes this month are nothing more than a temporary correction within a bull market, in part given the similarities between the current retreat with the meltdown in February.

Lakos-Bujas reiterated his positive outlook on U.S. stocks on robust earnings and predicted liquidity will improve as corporations resume their buybacks.

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Stock SectorOctober 18, 20185min11

When China’s stock market falls sharply, there’s a good chance U.S. stocks — and some big blue chip names like Goldman Sachs and Caterpillar — go down with it.

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The Shanghai Composite Index plunged 2.9 percent Tuesday, sending negative ripples through world markets. China stocks are now down 12 percent in October and 26 percent over the last 12 months.

But U.S. investors feel insulated from China’s losses. Why wouldn’t they, with the S&P up 4.5 percent this year while Shanghai is down 25 percent?

But a study by CNBC using analytics tool Kensho found that U.S. stocks are more often weaker when the declines in Chinese stocks are large. Over the past 10 years, when Shanghai stocks fell 10 percent or more in a 30-day period, the U.S. stock market was up only about 30 percent of the time, and the U.S. indexes all averaged significant declines.

For instance, the S&P 500 on average fell 4.8 percent when China was down 10 percent or more, and the Nasdaq was even worse with a loss of 5.3 percent.

Source: Kensho

When it comes to individual stocks, Goldman Sachs stock lost 10.6 percent on average over the 30-day periods, and was higher only 18 percent of the time. Caterpillar revenues are closely tied to China, and it was down 7.9 percent on average in those periods with gains only 20 percent of the time. DuPont lost 9.3 percent on average, and was higher just 17 percent of the time.

Caterpillar helped lead the Dow lower on Thursday, falling more than 3 percent.

Source: Kensho

Among the sectors, stocks of companies that produce commodities and materials were down 84 percent of the time when China shares fell hard. The SPDR Materials Select Sector lost 7.8 percent on average. The XLF, the Financial Select Sector SPDR Fund lost on average 6.4 percent and was up 31 percent of the time. Energy stocks, represented by the Energy Select Sector SPDR Fund lost an average 7 percent and were lower 20 percent of the time.

Source: Kensho

As Shanghai stocks went down, so did basic commodities, like copper, off 8.3 percent, and oil, off 8.5 percent on average in the 30-day periods. Crude oil was down nearly 70 percent of the time when Chinese shares toppled, and copper was down 78 percent of the time. Safe havens, however, averaged gains and gold rose by 0.6 percent while the dollar index was up 1.5 percent. Both were higher more than half the time.

Source: Kensho

WATCH:These are stock market safe havens during a sell-off

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Stock SectorOctober 18, 20188min12

Stocks fell sharply on Thursday, as the market continued to struggle in October.

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The Dow Jones Industrial Average dropped 450 points, led by declines in Caterpillar and Apple. The S&P 500 fell 1.9 percent as the communications and tech sectors lagged. The Nasdaq Composite pulled back 2.4 percent. Overseas, China’s Shanghai Composite dropped fell sharply.

Thursday’s decline added to the market’s steep losses for this month. The Dow and S&P 500 have fallen more than 3 percent each, while the Nasdaq is down more than 6.5 percent in October.

Among the reasons for selling on Thursday, according to investors, were concerns about the China trade war, a jump in bond yields in Italy and lingering worries about possible overvalued U.S. tech stocks.

Several stocks seen as economic bellwethers fell sharply in the U.S., as United Rentals and Textron both dropped at least 10 percent. Snap-on and Caterpillar, meanwhile, fell 8.8 percent and 4 percent, respectively.

The Shanghai Composite dropped 2.9 percent and hit its lowest level since November 2014.

“Mr. Market is speaking loud and clear on China. The country is losing and needs to cry uncle,” said Nick Raich, CEO of The Earnings Scout, in a note to clients.

“Chinese stocks are now at a four year low as rising U.S. interest rates and the likelihood of less favorable trade deals is going to adversely impact Chinese companies profits next year and its market price is re-setting lower to reflect that,” Raich said.

This drop in Chinese stocks increased fears that China’s economy, one of the largest in the world, could be slowing down, dragging down global growth. These worries increased on Thursday after European Central Bank President Mario Draghi said one of the risks for the economy was countries trying to circumvent EU budget rules.

Draghi’s comments sent Italian bond yields to their highs of the day and sent major European stock-market indexes to their session lows.

Concerns over global trade were also sparked as National Economic Council Director Larry Kudlow went after China. They are unfair traders. They are illegal traders. They have stolen our intellectual property,” Kudlow said at the Detroit Economic Club on Thursday. “China has not responded positively to any of our asks.”

Kudlow’s comments come as the U.S. and China engage in protectionist trade policies, slapping tariffs on billions of dollars worth of each other’s goods.

“Ultimately, they will come to the negotiating table,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management. “I don’t see how it benefits either country to spark a recession.”

U.S. equities were already under pressure on Thursday as Treasury yields traded back around multiyear highs. The short-term two-year yield hit its highest level since June 2008 before slipping. The benchmark 10-year note yield climbed to 3.205 percent.

Housing stocks also fell. The iShares U.S. Home Construction ETF (ITB) dropped 1.4 percent. They also fell after Bank of America Merrill Lynch downgraded shares of Toll Brothers and PulteGroup, along with NVR, as it reduced its forecast for housing starts.

The rise in bond yields came a day after the Federal Reserve released the minutes from its September meeting. The minutes showed the central bank is still convinced tighter monetary policy is the best course of action for the economy to remain steady.

“To me, this reflects a lack of trust in the Federal Reserve,” said Craig Callahan, president at Icon Funds. “The market fears the Fed will over-tighten.”

Yields have risen sharply recently. Last week, the 10-year yield — which is used as a benchmark for mortgage rates — climbed to its highest level since 2011. This rise has stoked fears that higher borrowing costs could slow down the global economy. These factors contributed to a sharp sell-off in equities last week.

“The bottom line is that the long end of the US yield curve has managed to break out for the first time in several years and that other developed market yields have also been moving higher,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management. “The fact that US yields only dropped slightly during last week’s equity rout is a sign that little demand for these instruments was sitting on the sidelines and there are already signs that the long bond is ready to revisit its recent high at 3.44 percent.”

The stronger yields offset robust corporate earnings results released Thursday.. Dow-member Travelers, Bank of New York Mellon, BB&T and Danaher were among the companies that reported better-than-expected earnings before the bell.

Investors came into the earnings season with high hopes. Analysts polled by FactSet expected third-quarter earnings to have grown by 19 percent on a year-over-year basis. So far, the season is off to a good start. Of the S&P 500 companies that have reported, 84.1 percent have posted better-than-expected profits.

Spriha Srivastava
contributed to this report.

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Stock SectorOctober 18, 20185min10

Vincent Deluard nailed his latest stock market call.

After growing increasingly wary of the slow-motion trainwreck developing in the Treasury market— which he warned was headed for a liquidity squeeze — the INTL FCStone macro strategist pulled out of equities.

He’d been thinking about it for a while. Just a couple of weeks prior, he warned that a “perfect storm” of bearish factors could send stocks tumbling. His exit was just an inevitable culmination of cautious sentiment.

Sounds great, right? Because of his prescient actions, Deluard avoided the brief meltdown that rocked stocks and wiped out 7% over a six-day period.

Not quite, says Deluard, who sees getting out as just half the battle. Now he has to figure out when to get back in. After all, who wants to miss the next leg up in history’s longest-ever bull market?

And figuring out when to reenter is easier said than done. The bearish conditions that drove the most recent stock sell-off haven’t just vanished, even if investor nerves seemed to have calmed somewhat.

The way Deluard sees it, three distinct things have to happen for him to dip his toes back into equities. They are as follows:

1) A sustained rally in Treasury prices

As Deluard pointed out in a note, the “entire edifice of modern portfolio theory and the essence of asset allocation rests upon the axiom that stock market risk can be diversified with long-term Treasuries.”

That is why it was so troubling when stocks and bonds sold off simultaneously last week. And to complicate matters further, it was spiking yields— which reflect declining bond prices — that helped stoke so much anxiety in the equity market.

Simply put, it will take a rebound in Treasury prices — and the associated decline in yields — to get Deluard to consider getting back into stocks.

2) Contagion doesn’t spread to the high-yield bond market

US companies are carrying a heavy debt load. That’s common knowledge. And while some doomsayers expect a reckoning, Deluard thinks spiking yields can be quarantined to Treasury.

But if they’re not, then all bets could be off — and he definitely won’t be getting back into stocks.

“A sudden removal of liquidity in the high yield market could turn an otherwise benign increase in Treasury yields into an economic nightmare as junk borrowers would no longer be able to finance their operations,” Deluard explained.

3) A de-escalation of the trade war

Corporate profit growth is at the center of Deluard’s trade-war argument. He says that if President Donald Trump doesn’t dial back the conflict, it will have a detrimental effect on margins.

“With a higher cost of labor, capital, and raw materials, margins can only increase if the cost of goods sold drops,” he said. “Analysts’ forecasts therefore assume that there will not be any new tariffs in the next two years.”

To keep more tariffs from hitting, a de-escalation will be necessary. And only then will Deluard consider edging his way back into equities.

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Stock SectorOctober 18, 201810min10

Has the Dow’s wild, up-and-down swings got you rattled? Stay calm, keep the panic to a minimum and stick to your plan. That’s the only way to dodge the most common portfolio-busting blunders. 

Don’t be embarrassed to admit that the two-day, 1,400-point drop in the Dow Jones industrial average last week had you fearing the worst. It’s OK to confess you replayed the horror movie “Return of the 2008 Financial Crisis” in your head.

It’s also fine to acknowledge that the Dow’s stunning rebound of almost 550 points Tuesday and the blue-chip average’s ability to bounce back from a 300-point slide Wednesday to finish down just 92 points added to your state of confusion.

Sure, these are anxious times. But angst – and uncertainty – come with the territory when you invest in stocks for long-term goals such as college tuition and a secure retirement.

The key to successful investing is avoiding critical mistakes that can derail your future plans. While some investors fear rising interest rates and trade disputes could continue to roil markets, others note that the economy and job market are still strong, providing support for stocks.

Here are the most common, and costly, errors to avoid when the stock market gets rough:

Letting fear take hold

Not controlling your emotions can lead you to overreact to short-term market drops. You could do things you may regret later, such as dumping all your shares just before the market begins a rebound.

“The first instinct when stocks are causing you pain is to want to get rid of the pain. And a way to do that is to sell everything,” says Andrew Tapparo, president and founder of Tapparo Capital Management, a financial advisory and investment management firm in Middleton, Massachusetts. “But that’s not the smartest thing to do.”

Selling in a panic is not a financial strategy.

Thinking too short term

No doubt, it’s unnerving when the Dow plunges 800 points in a single day like it did last week. There have been only two bigger point drops in history. But one bad day, or one bad week, in a market with a history of volatility is unlikely to knock your long-term goals off track.

“Don’t let the market’s ups and downs disrupt your long-term plan,” says Brad Bernstein, senior vice president of wealth management at UBS Financial in Philadelphia. 

A look back at market history drives home his point. Consider that the Standard & Poor’s 500 stock average dipped less than 7 percent at the low point of the recent stock pullback.

To put that in perspective, the broad U.S. stock index has suffered 56 “pullbacks” – or drops of 5 to 9.99 percent – since World War II. And it has recouped all its losses about a month and a half later, according to data from CFRA, a Wall Street research firm.

The broad market, which hit a fresh record high last month, is up 315 percent since the bull market began back in March 2009 following the worst market downturn since the Great Depression.

Misjudging tolerance for losses

Too many people wait for a steep downdraft in stock prices to realize that the anguish of losing money, even if it’s only a loss on paper, is too much for them to handle. More often than not, the losses keep them up at night and often trigger an impulse to sell.

“Building a portfolio that lets you sleep at night is a big part of dealing with downside,”  Tapparo says. 

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While people need to take some risk in their portfolios to amass enough savings over their lifetime, it’s better to build a portfolio that realistically takes into account how much money you can afford to lose without getting spooked out of the market at the wrong time, he adds.

A general rule is not to have any money riding on stocks that you need to tap quickly, as there’s always a risk prices will go into a free fall when you need the cash. 

Missing out after bailing out

The big risk of getting out of the market when things get rocky is that it is unlikely you will get back in and participate in the market’s eventual rally.

“Timing the market is impossible,” UBS Financial’s Bernstein says. “Selling during a pullback is the most expensive mistake an investor can make. When the inevitable rebound occurs, they are not in the market and that is when the best returns tend to occur.” 

Failing to rebalance portfolio

Investors who don’t regularly adjust their overall portfolios to reflect their desired amount of stocks and bonds can run into trouble when stocks turn south, says Ken Mahoney, CEO of Mahoney Asset Management in Chestnut Ridge, New York. 

Let’s say you want a mix of 60 percent stocks and 40 percent bonds. You can inadvertently increase your risk when the stock market is rising sharply and let your stock winners ride. The reason? You end up with a far bigger holding of stocks than you planned on. If you regularly adjust your portfolio, say on a quarterly basis, to make sure those portfolio percentages stay level, you force yourself to buy low and sell high, Mahoney explains.

“When the market is soaring, you automatically siphon off some of the gains, and when it takes a big hit like 2008, you add to stocks,” he says. “That strategy takes away the emotion and activates investor discipline.”

Peeking at your account balance too often

To avoid spooking yourself, try to avoid peeking at your portfolio account balance on big down days, as the size of the loss could shake you even more. A better strategy is to view your quarterly statements when they arrive every three months.

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Stock SectorOctober 18, 20187min8

I believe that the prospects for continued economic growth, assisted by certain improved equity market valuations, have formed the basis of a “new bull market” and should be supportive of higher equity prices. While additional short-term bouts of volatility can be expected, this new bull market will likely be driven by earnings growth and economic expansion.

As a result, I continue to pay particular attention to corporate earnings. With the passage of the tax act earlier this year, I anticipate that corporate earnings will further be bolstered in the quarters ahead by the lowering of the corporate tax rate from 35% to 21%.

Photographer: Michael Nagle/Bloomberg

As we head into the thick of earnings season for the third quarter of 2018, on top of strong first-quarter and second-quarter 2018 earnings seasons, FactSet estimated on October 5, 2018 that the earnings growth rate for the S&P 500 will be 19.2% for the third quarter. If earnings do register 19.2% for the quarter, it would mark the third highest earnings growth rate since the first quarter of 2011.  However, if third-quarter earnings do ultimately come in above the 20% growth mark, it would represent the third consecutive quarter of 20% earnings growth.

In addition, as of October 5, 21 companies within the S&P 500 Index reported third-quarter earnings and 86% of them reported a positive earnings-per-share (EPS) surprise while 71% of these same companies reported a positive sales surprise.

Finally, the blended net profit margin for the S&P 500 for the third quarter of 2018 is currently 11.6% and if 11.6% is the actual net profit margin for the quarter, it will mark a tie for the second highest net profit margin for the S&P 500 since FactSet began tracking this data back in 2008. All are encouraging statistics for both the economy and stock market, albeit from a small sample size.

Below are some “beats,” “matches” and ”misses” from earnings reports for the third quarter, across multiple sectors, which have been released thus far according to Yahoo Finance.

Costco Wholesale (COST) (GICS Sector: Consumer Staples)

Costco “matched” with reported third-quarter earnings per share of 2.36 versus an EPS estimate of 2.36.

PepsiCo (PEP) (GICS Sector: Consumer Staples)

Pepsi “beat” with reported third-quarter earnings per share of 1.59 versus an EPS estimate of 1.57.

Fastenal Co. (FAST) (GICS Sector: Industrials)

Fastenal, which distributes industrial and construction supplies, “beat” with reported third-quarter earnings per share of 0.69 vs. an EPS estimate of 0.67.

Delta Air Lines (DAL) (GICS Sector: Industrials)

Delta “beat” with reported third-quarter earnings per share of 1.83 versus an EPS estimate of 1.74.

Commerce Bancshares (CBSH) (GICS Sector: Financials)

Commerce “beat” with reported third-quarter earnings per share of 1.03 versus an EPS estimate of 0.96.

JPMorgan Chase (JPM) (GICS Sector: Financials)

JP Morgan “beat” with reported third-quarter earnings per share of 2.34 versus an EPS estimate of 2.25.

Wells Fargo (WFC) (GICS Sector: Financials)

Wells Fargo narrowly “missed” with reported third-quarter earnings per share (EPS) of 1.16 versus an EPS estimate of 1.17.

Citigroup (C) (GICS Sector: Financials)

Citigroup “beat” with reported third-quarter earnings per share of 1.73 versus an EPS estimate of 1.69.

International Business Machines (IBM) (GICS Sector: Information Technology)

IBM did “beat” with reported third-quarter earnings per share of 3.42 versus an EPS estimate of 3.4, but revenue fell short of expectations by registering $18.76 billion for the quarter versus estimates of $19.10 billion.

Netflix (NFLX) (GICS Sector: Communication Services)

Netflix, the Internet subscription service for watching television shows and movies, posted a strong “beat” with reported third-quarter earnings per share of 0.89 versus an EPS estimate of 0.68.

Johnson & Johnson (JNJ) (GICS Sector: Health Care)

J&J “beat” with reported third-quarter earnings per share of 2.05 versus an EPS estimate of 2.03.

Prologis (PLD) (GICS Sector: Real Estate)

Prologis, an owner, operator and developer of industrial real estate, “beat” with reported third-quarter earnings per share of 0.60 versus an EPS estimate of 0.35.


Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust (UITs) consistent with the theme discussed above.

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