Furious Week Fades as Dow Finishes Down Just 1%

War is hell, and the Brad Pitt-led Fury aims to demonstrate that as graphically as possible. A World War II U.S. tank team heads into Germany on a mission to rescue American soldiers trapped behind enemy lines. But really, the story is about blood, guts and horror. A new soldier peels a face off the tank; legs get shorn off by machine-gun fire; Brad Pitt stabbing a Nazi in the eye. NPR’s Chris Klimek writes that “Fury reminds us like no film since Saving Private Ryan 16 years ago that there was nothing good about [the Good War], and it does so with considerably less flag-waving,” while the Philadelphia Inquirer’s Steven Rea notes that “Fury presents an unrelentingly violent, visceral depiction of war, which is perhaps as it should be.” It should also top the box office this week with a $33 million haul, according to Box Office Mojo.

Columbia Pictures

The stock market had its own fury this week–if nothing compared to the horrors of war–furies that don’t show up in final weekly numbers. Sure, the S&P 500 fell just 1% to 1,886.76, while the Dow Jones Industrial Average dropped 163.69 points, or 1%, to 16,380.41 and the Nasdaq Composite dipped 0.4% to 4,258.44. Heck, the small-company Russell 2000 even gained 2.8% to 1,082.33.

But that kind of misses the point. On Wednesday however, the S&P 500 has fallen as low as 1820.66–or down 4.5% from the previous week, while the Dow Jones Industrials had moved a total of 1,268 points as it fell, bounced, fell and bounced again. Look at the final numbers and it’s as if “nothing happened,” says JJ Kinahan, chief strategist at TD Ameritrade. A lot did happen, though Kinahan doesn’t necessarily think that’s a bad thing. He notes that every few years you get these moves, where volatility increases, and you get a “reorganization in the market where people try to reevaluate where valuations are.” Ultimately, though, Kinahan expects the market to head higher.

He’s not the only one. Nuveen Asset Management’s Robert Doll thinks the correction is nearing its end:

The past few days have been wild for the markets. Equities had been trending lower before volatility spiked and prices dropped sharply earlier this week. Investors are now asking whether the near-term downturn is finished and if this bull market is ending. Our answer: We think there is a two-out-of-three chance that we have already seen the lows for this current correction (1,820 for the S&P 500 Index), although volatility is likely to remain elevated and we may see another test of those lows. In any case, we also expect the bull market to continue.

That may be the case for the overall market, but Deutsche Bank’s Stephen Richardson and team acknowledge that the worst might not be over for energy stocks, which have dropped 8.2% in October, despite rallying 0.9% on Friday:

A commodity price assumption underlies any investment in E&P equities. The tacit assumption of the market has been that with global prices in the $90-110/bbl band, domestic oil producers would remain in a halo of profitability where the excess rents associated with resource expansion, drilling efficiencies, and technology advances would all accrue to the producers. The humbling reality is that without support for global prices, these excess returns (and the growth fueled by re-investment rates) evaporate and so follows equity valuation…

The recent decline in the equities has been a reminder of the cyclical nature of the industry and that despite growing resource and technology advances, pullbacks of this scale have previously occurred. Putting the recent ~30-35% EPX pullback into context with declines seen over the past decade shows we have been in this environment before with the most recent ~30% decline occurring in 1H12. Although unlikely to be as severe as the decline following the financial crisis that saw oil prices decline from ~$145/bbl to ~$30/bbl, the continuation of US supply growth (on pace for ~900-1,000mbpd annual additions in 2014/15) and now lower global demand keep us mindful of these trends.

Like the Boy Scouts say: Be prepared.