October May Bring Bear Market’s End

October will get a chance to live up to its historical reputation as a “bear killer” on Wall Street.

But stock prices, reeling for the last five weeks, may have to go lower before they go higher, many analysts warn.

The Dow Jones industrial average and the Nasdaq composite index hit four- and six-year lows early last week, respectively, before bouncing at midweek, then selling off sharply again on Friday.

A rising tide of corporate earnings warnings and growing fears about a war with Iraq have weighed heavily on stocks this month, and October might not see much improvement early on, as third-quarter profit reports arrive and war concerns remain, analysts say.

But optimists are comforted by October’s historical role as a month in which major bear markets have finally expired.

Steep market slides in 1990 and 1998 ended in October, for example. That also was true of several other declines since World War II.

The worst of the selling in the 1987 market crash occurred over several days in October of that year, though some key indexes did not reach their final lows until December.

The current bear market, at 30 months old the longest in a generation, is proving hard to slay. The market’s three main gauges--the Dow, the Nasdaq composite and the Standard & Poor’s 500--last week posted their fifth straight weekly declines, a streak not seen since the five weeks ended June 21.

The Dow lost 3.6% for the week to end Friday at 7,701.45. The Nasdaq index fell 1.8% for the week to 1,199.16 and the S&P; 500 lost 2.1% to 827.37.

At present levels, September’s trading, which finishes today, would mark the worst monthly decline this year for major indexes. The S&P; 500 is down 9.7% so far this month and down 28% year to date.

The Dow is down 23.2% for the year and the tech-heavy Nasdaq is down 38.5%.

The month’s performance is true to September’s historical form: On average, it has been the year’s worst month for stocks since 1950.

Investors, whose confidence was shaken by the mid-summer market plunge blamed at least in part on the rash of corporate financial scandals, lately have been spooked by a steady stream of profit warnings from big-name companies.

The warnings suggest that the economic recovery is not translating well to many firms’ bottom lines.

“We’ve had a lot of negative news with the earnings preannouncements. The question now is whether the preannouncements are accurate or not,” said Richard A. Dickson, a technical analyst at brokerage Hilliard Lyons in Louisville, Ky.

In the last week alone, companies including tobacco and food giant Philip Morris, drug firm Wyeth, Delta Air Lines and telecommunications equipment maker Nortel Networks lowered their profit outlooks.

Investor sentiment also has been hit by deepening fears of war with Iraq. The Federal Reserve last Tuesday cited “geopolitical risks,” such as war, as a factor threatening the economy. The Fed kept its key short-term interest rate steady at a 40-year low of 1.75% but signaled that it stands ready to reduce rates further if warranted.

“The economy is not a set of numbers and statistics, it’s made of people like you and me,” said Alan Skrainka, chief market strategist at brokerage Edward Jones in St. Louis. “People act on how they feel. And by and large, investors feel pretty anxious.”

Given the dimming outlook for corporate profits and the potential for a war with Iraq, any new shock in October could hit stocks hard, experts warn. But then, “perhaps that’s what will give us a bottom in the market,” Dickson said.

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Associated Press was used in compiling this report.