Stocks May End Crazy Month on High Note

U.S. stocks advanced Friday afternoon as investors shrugged off the worst drop in consumer sentiment on record and the first drop in personal spending in two years, putting the market on track to end this mad month on a high note.

Traders noted that pension funds were buying stocks to rebalance their portfolios as today is the last day of the October.

Indeed, there will many a sigh of relief today as we bid adieu to October, which is typically a one of the worst months of the year for the market, but this year, turned out to be the worst October since 1987, when the stock market crashed.

Still, it won't be all smooth sailing from here.

First, we have to get through the election on Tuesday. Then, the economy.

"There’s a lot of things not in this market," Art Cashin, director of floor operations at UBS, told CNBC. "This market is still working its way out of crisis mode. It hasn’t come to grips with the recession that’s coming up, which is not going to look like a V or a U, it’s going to look like a bathtub and that will carry us longer and further than we would care to be."

The Reuters/University of Michigan gauge of consumer sentiment dropped to 57.6 in October from 70.3 in September, its steepest drop on record. However, a mid-October reading had indicated as much, so the report came as little surprise to the market.

Personal spending fell 0.3 percent, marking the first time in two years that consumers have cut their spending, even as income ticked up 0.1 percent. Spending came in as expected but economists expected a slightly higher bump in income.

Most Asian markets fell after the Bank of Japan cut interest rates for the first time in seven years but cut less than expected dropping a key rate to 0.3 percent from a decade-high 0.5 percent.

In Europe, stocks were also lower as a slide in commodities prices weighed on shares. German retail sales hit their lowest level since January 2007, fueling recession fears.

Electronic Arts shares tumbled Friday after the videogame maker slashed its full-year forecast, raising concerns that a slowdown in consumer spending may slam the videogame market. Its shares tumbled nearly 20 percent.

This piles on to worries about the future for tech after Intel warned about the impact of the financial crisis.

Intel sent a ripple of worry through tech land after the chip giant said the financial crisis could have several effects on its business, including insolvencey of key suppliers, resulting in product delays, and an inability to obtain short-term financing of its operations from issuance of commercial paper. Intel said it will issue a mid-quarter update on Dec. 4 amid the murkiiness of the current environment.

This followed a great day — and week for techs — as analysts noted the sector will be one of the biggest beneficiaries of a recovery and some investors are starting to scour around the sector for bargains.

General Motors was the biggest drag on the Dow after a deal to merge the struggling auto maker with Chrysler hit an impasseafter the White House ruled out funding for it, according to three people with direct knowledge of the talks.

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Another deal may be off, with increased speculation that Google and Yahoo may be walking away from their planned search partnership, the Wall Street Journal reports.

In earnings news, transatlantic exchange group NYSE Euronext said its adjusted operating net income for the third quarter rose 4 percent to $192 million, thanks to an increase in trading volumes.

Chevron soared past forecasts, delivering earnings of $3.85 a share. Analysts had pegged earnings at $3.25 a share, according to Thomson Reuters.

This came a day after fellow oil giant ExxonMobil reported its biggest quarterly profit ever.

Cummins shares lost more than 10 percent after the company, which makes engines and power generators, said its quarterly earnings rose 24 percent as growth overseas helped offset weakness in the U.S.