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Trading Radar: Volatility To Remain Elevated

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Economics, earnings reports, and market events for the week ahead.

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The week that passed was the most volatile of the year with the Russell 2000 (RUT) reaching a low of -14.26% from its high and the S&P 500 (SPX) -9.84%. On Wednesday, crude oil began to turn and the market was able to make a panic low, and has recovered by a few percent since then.

Volatility remains elevated as market participants are wary about unwinding protection bets just yet. In the past week, intraday moves in the SPX were frequently as much as 50 points, which justifies a VIX in the 30's. Part of the rally was built on the expectation the Fed may do something in the coming weeks to help arrest plunging market inflation expectations. Although the idea of another round of asset purchases, or increasing the current program, has been floated, the appetite for the Fed to go down that road is still very low. In any case, they will have to figure out a way to keep the forward path of interest rates lower until they see sustained inflation growth. Remain alert for any tapebombs in the next week, especially if you have a bearish view, even though there are no scheduled public Fed member comments.

The major economic event for next week in the US is the September consumer price index, scheduled to be reported on Wednesday. Economists are expecting headline price growth to remain flat from the month prior and at 1.6% annual pace. Because of the substantial decline in gas prices, it would not be surprising to see this figure miss to the downside. Similarly, core prices are expected to grow by 0.2% from the prior month, suggesting a substantial snapback in home price growth, and up to a 1.8% annual rate.

The major economic event next week for markets in general is the China third quarter GDP report on early Tuesday morning. Although Chinese markets do not necessarily trade off economic fundamentals, another shortfall in growth will not reassure many in the market, even though it is expected to be poor. Lately the government has continued to inject money into the state-run banks in hopes of minimizing the damage on non-performing loans and boost credit creation. We'll see which force wins out.

Earnings reports will continue apace next week. Market participants will be more focused on fourth quarter guidance at this point because the weakness from the third quarter is already well priced. They are concerned that the lower oil prices and higher dollar will end up causing irreparable disruptions in company growth. Notable reports include Apple (AAPL), IBM (IBM), Halliburton (HAL), Coca-Cola (KO), Yahoo! (YHOO), Boeing (BA), AT&T (T), and Microsoft (MSFT).

Monday, October 20

US Economics (Time Zone: EST)
 
No major economic reports
11:00 Fed to purchase $1b-$1.25b notes in 5 to 6-year range
11:30 Treasury to sell $24b 3-month bills and $30b 6-month bills
 
Global Economics (Time Zone: GMT)

06:00 EUR German PPI
 
Earnings
 
Before:
Halliburton (HAL)
Valeant Pharma (VRX)
Hasbro (HAS)
 
After:
Texas Instruments (TXN)
Chipotle Mexican Grill (CMG)
IBM (IBM)
Apple (AAPL)
Rent-A-Center (RCII)

Tuesday, October 21

US Economics (Time Zone: EST)
 
10:00 Existing Home Sales (Sep) - expected 5.10M, prior 5.05M
11:00 Fed to purchase $1.4b-$1.7b notes in 7 to 10-year range
11:30 Treasury to sell 4-week bills

Global Economics (Time Zone: GMT)

02:00 CNY Retail Sales, Industrial Production, Fixed Investment
02:00 CNY GDP (3Q)
04:30 JPY All Industry Activity Index
06:00 CHF Trade Balance
08:30 GBP Public Budget

Earnings

Before:
Coca-Cola (KO)
Harley-Davidson (HOG)
Kimberly-Clark (KMB)
McDonald's (MCD)
United Tech (UTX)
Lockheed Martin (LMT)
Regions Financial (RF)
Verizon (VZ)
Reynolds American (RAI)
 
After:
Six Flags Entertainment
Cree (CREE)
Yahoo! (YHOO)
E-Trade Financial (ETFC)
Broadcom (BRCM)
VMWare (VMW)
Discover Financial (DFC)
Intuitive Surgical (ISRG)

Wednesday, October 22

US Economics (Time Zone: EST)

07:00 MBA Mortgage Apps
08:30 Consumer Price Index YoY (Sep) - expected 1.6%, prior 1.7%
08:30 CPI Ex Food & Energy YoY - exp 1.8%, prior 1.7%

Global Economics (Time Zone: GMT)
 
JPY Trade Balance
00:30 AUD CPI (3Q)
08:30 GBP Bank of England Minutes
14:00 CAD Bank of Canada Rate Decision
21:45 NZD CPI

Earnings

Before:
Abbott Labs (ABT)
Boeing (BA)
Dow Chemical (DOW)
General Dynamics (GD)
Northrop Grumman (NOC)
Stanley Black & Decker (SWK)
Biogen (BIIB)
US Bancorp (USB)
Owens Corning (OC)
Angie's List (ANGI)
Xerox (XRX)
Ingersoll-Rand (IR)
Norfolk Southern (NSU)
EMC (EMC)
 
After:
Citrix (CTXS)
AT&T (T)
Tractor Supply (TSCO)
Skechers (SKX)
SLM (SLM)
Yelp (YELP)
 
Fortinet (FTNT)
Lumber Liquidator (LL)

Thursday, October 23

US Economics (Time Zone: EST)

08:30 Initial Jobless Claims, expected 294k, prior 287k
08:30 Continuing Claims - exp 2440K, prior 2429k
08:30 Chicago Fed National Activity Index (Sep) - prior -0.21
09:00 FHFA Home Price Index MoM (Aug) - exp 0.3%, prior 0.1%
09:45 Markit US Manufacturing PMI (Oct prelim) - exp 57.0, prior 57.5
10:00 Leading Index (Sep) - exp 0.7%, prior 0.2%
11:00 Kansas City Fed - exp 6, prior 6
11:00 Fed to purchase $1.35b-$1.65b notes in 6 to 7-year range
1:00 Treasury selling $7b 30-year TIPS (reopening)
 
Global Economics (Time Zone: GMT)

AUD RBA's Stevens speaks in Sydney
Japan Investors Purchases of Foreign Stocks/Bonds
01:35 JPY Manufacturing PMI (Oct prelim)
01:45 CNY HSBC Manufacturing PMI (Oct prelim)
07:30 EUR German Manufacturing & Services PMI (Oct prelim)
08:00 EUR Eurozone Manufacturing & Services PMI (Oct prelim)
08:30 GBP Retail Sales
14:00 EUR Eurozone Consumer Confidence (Oct advance)

Earnings

Before:
Eli Lilly (LLY)
Union Pacific (UNP)
T Rowe Price (TROW)
Lorillard (LO)
KKR & Co (KKR)
Janus Capital (JNS)
Dr Pepper Snapple (DPS)
Caterpillar (CAT)
UnderArmour (UA)
 
After:
Freescale Semi (FSL)
Altera (ALTR)
Microsoft (MSFT)
Deckers Outdoor (DECK)
Amazon.com (AMZN)
Juniper Networks (JNPR)
Riverbed (RVBD)
Pandora (P)
 
3M (MMM)
Occidental Petroleum (OXY)
Comcast (CMCSA)

Friday, October 24

US Economics (Time Zone: EST)

10:00 New Home Sales (Sep) - expected 470K, prior 504K

Global Economics (Time Zone: GMT)

NZD Trade Balance
01:30 CNY China Property Prices
02:00 CNY Leading Index
06:00 EUR German GfK Consumer Confidence
08:30 GBP 3Q GDP (advance)

Earnings

Cabot Oil & Gas (COG)
Colgate-Palmolive (CL)
Procter & Gamble (PG)
Moody's (MCO)
Ford (F)
UPS (UPS)
Bristol-Myers (BMY)
State Street (STT)

Twitter: @MichaelSedacca

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No positions in stocks mentioned.

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