5 Top-Ranked Stocks That Survived October's Carnage

Ultimately, U.S. markets closed an ugly October on a high. Strong earnings from major brand names helped all three benchmarks to gain at least 1% during Halloween’s trading session. But the indexes all suffered record reverses over the past month. Trade tensions, rising rates and concerns about slowing global growth led to these losses.

A section of market watchers think losses will continue for stocks going into November. But others think this is a healthy correction and that robust earnings and a strong economy will soon fuel gains. This is why it makes sense to bet on stocks that have increased over the past month and are poised to consolidate gains in the days ahead.

Benchmarks Suffer Record Losses

During October, the S&P 500 declined 6.9%, suffering its worst monthly loss since September 2011. The Dow declined 5.1%, suffering its sharpest monthly decline in percentage terms since January 2016. But it was the Nasdaq which suffered the most. The index lost 9.2% over the past month, its largest decline since November 2008.

In fact, tech majors experienced sustained reverses over October. In particular, the FAANG stocks were battered following concerns over earnings growth, data privacy and user security. While Amazon (NASDAQ:AMZN) declined 20.2%, Netflix (NASDAQ:NFLX) , Facebook (NASDAQ:FB) , Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL) plummeted 20.9%, 6.6%, 3.7% and 9.8%, respectively, in October.

Rate Spike, Trade Strife, Growth Fears Hurt Stocks

Stocks suffered a jolt early in the month after the Fed Chair said the economy still had a “a long way” to go before experiencing neutral interest rates. Powell added that the economy no longer requires a soft monetary stance that the Fed put in place nearly a decade ago. The central bank is widely expected to raise rates to 3.4% in December.

Additionally, trade fears continued to haunt markets. A report from Bloomberg released this week revealed that the United States is likely to announce fresh tariffs on Chinese imports in December. Earlier in the month, the IMF lowered its 2019 outlook for the United States and China, citing intensifying trade tensions.

Bear Market or Healthy Correction?

A section of analyst thinks that the longest bull market ever is nearing its end. The end of easy money is possibly hastening its demise. Others argue that the market is experiencing a much-needed correction after a period of overheating.

This may indeed be true since the economy remains strong and earnings continue to be robust. In this case, October’s decline could be a replay of the plunge experienced over January and February. On that occasion, markets recovered to touch new highs.

Our Choices

Markets have endured a tough October with benchmarks suffering record losses. Concerns related to rising rates, trade tensions and slowing global growth have been the primary factors behind this decline. However, a healthy correction followed by fresh gains is likely in the month ahead.

This is why it makes sense to bet on stocks that have gained over the past month and are set to move higher in the near future. However, picking winning stocks may be difficult.

This is where our Zacks Investment Research

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Written By: Zacks Investment Research