October's Historic Financial Jitters

The markets were down in the first few days of October, a typically high-drama month for the financial markets. Statiscially speaking, Septembers are historically the worst months for the market, but 80 years after the 1929 crash, October still has the wildest rides, reports correspondent Hari Sreenivasan.

As if on cue, the first two days in October were marked by a two percent drop in the Dow Jones Industrial Average. It's a jittery start to a month riddled with history and superstition in the financial market.

"The history suggests that October is a scary month, legitimately, for the market," said David Wyss, chief economist for Standard & Poor's, a provider of financial market intelligence.

In some years, October stock prices have fallen with the leaves - and the temperature. Last year, October saw a 15 percent decline. The two most dramatic single-day stock crashes in history came in this month. On Oct. 29, 1929, the Dow dropped 12.8 percent, and on Oct. 19, 1987, the Dow dropped a breathtaking 22.6 percent in a single trading session.

But the 10th month has also seen 11 bear market turnarounds - for example, in 2002, a long stock slide caused by the dot-com bust turned around in October and began a climb upward.

"There are some fundamental things that tend to go on in October, that can create extra volatility in the market," said Jim Awad, managing director at Zephyr Management, a global private equity and marketable securities firm.

October's financial jitters date back to the 1800s. Back then, said Art Cashin of UBS Financial Services, you could chalk it up to the crop cycle. At harvest time, money would leave the city's major banks to pay for food and grain. That put the squeeze on the financial markets, making them vulnerable to panics. We're no longer an agrarian society, Cashin notes, but the calendar pattern continues.

In today's markets, October is a critical financial reporting month - it's the time when companies report third quarter earnings.

This year, analysts and traders are bracing for corporate results.

"October this year is important because were going to find out the truth," Awad said.

And that truth is, if earnings are robust, the recovery is likely on track. If earnings are lackluster, it will be a long, slow road back to economic health.