|
October
was one of the worst months the stock market has ever been
forced experience. The Dow Jones index fell 1,526 points or
14.1%. The Nasdaq dropped 361 points or 17.4%. And the S&P 500
index fell 196 points or 16.8%.
The
extreme volatility in the markets led to 20 out of the 23
trading days producing triple-digit moves in the Dow index. The
Dow fell over 300 points on seven different days, including a
whopping 733 point loss on October 15. The intraday volatility
was even greater with 19 days producing swings of over 500
points, including the extraordinary 1,215 swing on October 10.
As the
smoke cleared on Wall Street, the carnage from the crash of
October 2008 was almost beyond belief. Solid, blue-chip
companies saw their market capitalizations fall 20, 30, 40 and
even 50%.
Dow
Components
The
decline in ad spending certainly hit the internet sector in
October. The consistent theme on quarterly earnings calls was
the significant economic challenges that hit in
September-October and bleak outlooks for the future.
-
Alcoa
saw their shares lose almost half their value (49%) as
falling commodity prices, analyst downgrades and
disappointing third quarter results had investors running
for the exits.
-
General Motors fell 39% on a 16% drop in September auto
sales and concerns about the company’s ability to remain in
business beyond 2009.
-
Weakening demand and the company’s delaying giving 2009
guidance until next quarter sunk Catepillar’s shares nearly
26% for the month.
-
Other
notables included Bank of America and Citigroup both falling
over 30%.
Internet
The
decline in ad spending certainly hit the internet sector in
October. The consistent theme on quarterly earnings calls was
the significant economic challenges that hit in
September-October and bleak outlooks for the future.
-
VistaPrint led the decline with a 48% drop after the company
reduced their 2009 forecast.
-
Travel
Zoo fell 44% after reporting disappointing third quarter
results that failed to meet Wall Street’s expectations.
-
Orbitz
dropped 43% on analyst downgrades and anticipation of weak
third quarter numbers.
-
Dice.com fell 42% after reducing 4th quarter
guidance and commenting that the challenging economic
environment makes it unlikely to see growth in 2009.
Restaurants
A bleak
economic outlook sunk restaurant stock prices as the market
anticipates a significant reduction in discretionary consumer
spending. In tough economic times, one of the first items to be
cut from household budgets is eating out. The entire airline
sector benefited from falling oil prices in October. Crude oil
prices fell from almost $100 per barrel at the beginning of the
month to less than $70 by the end of the month.
-
Ruby
Tuesday shares dropped 58% on poor quarterly results and
speculation that the company may be forced to file for
bankruptcy.
-
Brinker International, the parent company of Chili’s,
Maggiano’s Little Italy and On The Border Mexican
restaurants, was down 48% after reducing their 2009 outlook
to earnings growth of only 8 – 10%.
-
Domino
Pizza dove 51% after posting weaker than expected quarterly
results and announcing that it was now looking for funding
after their primary lender (Lehman Brothers) filed for
bankruptcy.
-
In
addition, Red Robin, Cheesecake Factory, and Steak’n Shake
were all down 40% or more for the month.
Technology
Technology
stocks have certainly fared better this year than they did
during the last (tech-led) recession. However, the last two
months they have felt the impact of consumers reducing their
spending and businesses cancelling contracts and cutting their
cap ex budgets.
-
Salesforce.com shares dropped 39% as UBS downgraded the
stock to a sell rating and management comments that pricing
pressures will likely force it to cut prices.
-
Sun
Microsystems was down 39% after pre-announcing disappointing
quarterly results.
-
Symantec’s stock price fell 36% after providing
disappointing third quarter guidance that was well below
Wall Street’s expectations.
-
In
addition, Best Buy, Garmin, Adobe Systems, SAP and Corning
were all down over 30% for the month.
Department
Stores Dillards (-55%)
Reduced
consumer spending led to declining same-store sales and to
falling stock prices within the Department store sector.
·
A 12% drop
in same-store sales, compounded with being removed from the S&P
500 index sunk Dillard’s shares 55%.
·
Declining
sales prospects also led to Macy’s, Nordstrom’s, and Sears
Holdings all dropping over 30% for the month.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
Read
Disclosure Policy |
