Despite another big advance on Friday, paper losses in the U.S. stock market came to $2.5 trillion for the month, according to the Dow Jones Wilshire 5000 Composite Index, which represents nearly all stocks traded in the United States. The 17.7 percent decline was the worst since the 23 percent drop in October 1987.
The Dow Jones industrials rose 144 points on Friday, giving the market its only back-to-back gains of the month and its best week since mid-October 1974.
But it was a trick-or-treat month. Fear coursed through the markets in a way that hadn't been seen for more than two decades, causing rushed selling by everyone from middle-class investors to multibillion-dollar hedge funds.
The Dow plummeted 2,400 points in the month's first eight trading days, and by Friday there were only three days when it didn't finish the session with a triple-digit movement.
October was the month when the credit crisis that started squeezing Wall Street institutions earlier in the fall spilled into the mainstream, hampering banks' ability to lend and consumers' ability to borrow, and ultimately taking huge chunks out of retirement savings and other stock funds.
Meanwhile, the ripple effect spread to the rest of the world economy and caused similar carnage on stock markets from London to Singapore and beyond amid fears of a deep recession.
The Dow finished down 14 percent in October, and world markets were worse. As of Thursday, it was the worst month on record for stock markets in developed countries as measured by the MSCI World Index, which lost 19 percent of its value. Emerging markets suffered even more, shedding 29 percent.
"It seems like it all came together in October," said Denis Amato, chief investment officer at Ancora Advisers. "You had people recognize that things were worse than normal with the credit crisis. It just sort of collapsed all into that one period."
Experts aren't sure why October has been such a cursed month for stock market meltdowns
- although September has registered the biggest declines of any month historically.
But October's reputation is well known on Wall Street, as is the fact that stocks perform much worse during the six-month period ending with October than during the rest of the year. Since World War II, the Standard & Poor's 500 index has gained 7 percent annually from November through April and just 1 percent from May through October.
Deborah Lucas, professor of finance at Northwestern University's Kellogg School of Management, thinks it's unfair to suggest that individual investors panicked or acted irrationally in the past month.
"There was a basis for the fear," she said. "There was a desire to put their money somewhere safer. If everyone on Wall Street has rushed out the doors, why is it that we tell everybody on Main Street they shouldn't panic?"
The seeds of October's losses were sown in September. Investors already were feeling jittery about the deteriorating financial outlook as the consequences of the collapse in housing prices crept into every corner of the economy.
The news got stunningly worse on Sunday, Sept. 14 - a pivotal day that set stocks' meltdown in motion. That was the day the government refused to bail out Lehman Brothers Holdings Inc. after a weekend of intense negotiations, leaving the investment house to file for bankruptcy the next day.
