Major stock market indexes rose in October, but not everyone shared in the wealth. The CBOE Volatility Index was elevated, and some stocks suffered sharp losses following bad earnings reports. These five stocks were some of the biggest movers last month, and they illustrate important trends that are shaping the market right now.
1. Avis Budget Group
Rental car powerhouse Avis Budget Group (CAR -3.68%) enjoyed a monster month, gaining nearly 60% during October. There wasn't any news published by Avis Budget or any of its competitors that would indicate a change of that magnitude. Rival Hertz released quarterly earnings on Oct. 27, in which it fell just shy of revenue forecasts, but exceeded Wall Street's earnings expectations. It was a decent report with positive outlook, but it wasn't transformational. Avis Budget Group went on to post similar results after the close on Oct. 31. It surpassed analyst estimates for sales and profits, but the stock actually fell amid concerns that falling used car prices could impact the value of its fleet.
There was some positive momentum around travel stocks in general in October, with several airlines and cruise operators turning in strong months. That's down to strong demand for leisure and business travel. Avis Budget Group also received an upgrade from an analyst at a prominent bank, but that can't explain the huge gains on its own.
This is a case of a cheap stock gaining momentum from the Reddit and meme stock trading crowd, which is magnifying modest positive news on fundamentals. Avis Budget's enterprise-value-to-EBITDA ratio was just over 4 to start the month, and its forward P/E ratio was below 10. There wasn't a strong downward catalyst, and the stock's high 2.26 beta shows that the group of traders involved in Avis have driven high volatility recently. Those conditions can lead to wild price swings, even if there's no important news.
This is a prime example of short-term supply and demand fluctuations influencing a stock's price with little regard for fundamentals.
2. United Airlines
United Airlines Holdings (UAL -1.56%) impressed investors with quarterly results that exceeded both internal forecasts and analyst estimates. The company's revenue rose more than 13%, its margins improved, and it had fewer empty seats. United attributed this to resumed business travel as more people return to offices, along with increased leisure travel associated with remote work.
This partially eased Wall Street's fears that consumer sentiment and an economic slowdown would hurt travel stocks. The U.S. Global Jets ETF was up 16.6% last month, and the Defiance Hotel, Airline, and Cruise ETF climbed 13%. United Airlines was a leader of an industrywide trend, and it created optimism that fears about economic contraction were overexaggerated.
Industrial bellwether stock Caterpillar (CAT 0.58%) rose 30% in October, bringing its massive market cap above $110 billion. The industrial sector had a good month in general, but Caterpillar separated itself by reporting strong earnings. It posted 21% sales growth and smashed analyst estimates with better-than-expected profit margins.
Strong demand for Caterpillar's products are a bullish sign for global economic activity. Investors around the world are concerned that rising interest rates will threaten growth and that things might get tough over the next few quarters. However, many cyclical companies are hanging in there so far, and stellar results from heavy machinery producers are an encouraging sign.
Halliburton (HAL -1.29%) is an oilfield services leader that rose 45% in October. Halliburton's customers are major energy production businesses, and strong cash flows and financial health among energy producers drive demand for oil field services. OPEC's announcement that it will slash production is likely to keep crude oil prices high, boosting cash flows throughout the sector. This had a similar effect on Halliburton's peer Schlumberger -- the two had nearly identical charts in October.
The same catalysts drove strong performance in other industries within the energy sector, too. Marathon Oil led exploration and production stocks with a 32% return, and many of its peers posted similar results. The outlook for crude oil prices drives performance in energy stocks, especially those with riskier, debt-heavy balance sheets.
5. Meta Platforms
Meta is also burning enormous sums of cash in the development of its virtual reality products, which hasn't had any meaningful user traction yet. Investors have serious concerns about the company's long-term growth catalysts.