Wednesday, October 6, 2010

Stocks: The best is over

Stocks closed out the best September in 71 years last week, but don't break out the champagne yet. October trading is likely to be choppy as uncertainty looms over the market.

September's run-up was spurred by economic readings that managed to beat painfully low expectations, said Alec Young, equity strategist at S&P Equity Research.

"The psychology and expectations about the economy had just gotten so depressed in August and double-dip fears were prevalent, so we got a relief rally in September when economic reports started coming out that weren't great but just weren't as bad," he said.

That relief is now subsiding amid a new wave of uncertainty about the economy ahead of the the government's monthly employment report, the first wave of corporate earnings and November's midterm elections.

But while that uncertainty is likely to stifle further rallies, it doesn't mean the market won't gradually make its way higher, Young said.

"The 9% months are over," said Young, referring to the S&P's 8.7% spike in September, its biggest September gain since 1939. "We're likely to continue seeing this upside, but it will be more like a slow grinding higher, not sprinting higher." (more)

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