Friday the 13th fails to fright “fearless” market
10/16/17
No nightmare on Wall Street here. As major market indexes drifted toward all-time highs last week, the fear index headed toward the graveyard.
SPX vs VIX, 10/9/17 - 10/13/17

Source: OptionsHouse by E*TRADE

The CBOE Volatility Index measures how much uncertainty (or perceived risk) there is in the movement of the price of the SPX.  Even with the index near all-time highs, the prevailing sentiment is that investors are not afraid of a big market move. Market observers point to multiple factors that may be keeping fear abated:

  • The recent results from the University of Michigan’s consumer sentiment index have consumer confidence in the economy at its highest measuret since 2004.
  • Retail sales numbers last week were encouraging, suggesting the economy remains on solid ground. In fact, from the release of the FOMC minutes from last week, it appears the Fed may have enough confidence in the resiliency of the economy to introduce a rate hike in December.

All of this seems to bode well for the markets. So, at least as Friday the 13th is concerned, things don’t appear too scary for the markets.

It was a mixed week in terms of sectors, with traders taking profits in banks after a strong September. Utilities and real-estate, which tend to move in the opposite direction as financials, were the best performers. Buyers also returned to global stocks and precious metals.

Wal-Mart Stores (NYSE: WMT) staged the biggest rally among S&P 500 stocks, ripping 10 percent as investors applauded its new digital strategy.2 Advanced Micro Devices (NASDAQ: AMD) and CF Industries (NYSE: CF) followed with gains of about 8 percent.

California utility PG&E (NYSE: PCG) led to the downside, tanking 16 percent on concern its power lines may have triggered deadly wildfires in the state.3

This week is busy to say the least: Today is quiet enough with earnings from Netflix (NASDAQ: NFLX) this afternoon, but things heat up tomorrow with earnings from Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), and Johnson & Johnson (NYSE: JNJ). Industrial production data is also due.

Wednesday brings the release of the Fed’s Beige book, which could give more insight into possible Fed action come December. Housing starts and building permits are also released in the morning, along with earnings from several banks including U.S. Bancorp (NYSE: USB), M&T (NYSE: MTB), and PacWest (NASDAQ: PACW).  

Thursday’s economic lineup includes initial jobless claims and the Philly Fed’s manufacturing Index. Big names like BNY Mellon (NYSE: BK), Philip Morris (NYSE: PM), Verizon (NYSE: VZ), and PayPal (NASDAQ: PYPL) also report earnings.

The week concludes Friday with existing-home sales, along with earnings from GE (NYSE: GE), Honeywell (NYSE: HON), and Procter & Gamble (NYSE: PG).

 

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1. Bloomberg: Consumer Sentiment in U.S. Unexpectedly Surges to 13-Year High. 10.13.17.

2. MarketWatch: Wal-Mart’s ‘sense of urgency’ triggers flood of stock price-target increases. 10/12/17.

3. CNBC: PG&E shares plunge on concern its power lines may have started California wildfires. 10.12.17.