Will traders ever see volatility again?
06/19/17

Move over dodo bird. Volatility is the newest endangered species.

Starved of market-moving news, stocks barely did anything last week. There were a few big movers and fewer events capable of having an impact on sentiment. All told, the S&P 500 rose less than 0.1 percent between Friday, June 9, and Friday, June 16. CBOE's dreaded VIX cowered near multi-decade lows. So much for the "fear" index.

Sure, the Federal Reserve raised interest rates for only the fourth time in more than a decade, but economists saw that one coming from a mile away. They were more interested in debating whether policy makers are tilting at inflationary windmills.1 There was also good news from jobless claims and industrial activity, but weakness in housing and consumer sentiment. 

Retailers took a beating, hammered by the one-two punch of bad news. First, grocery giant Kroger (NYSE: KR) cut guidance.2 Then e-commerce disruptor Amazon.com (NASDAQ: AMZN) invaded its market niche with a surprise $13.7 billion purchase of Whole Foods Market (NASDAQ: WFM).3

KR ended the week down 28 percent, making it the worst performing member of the S&P 500. Drug maker Mylan (NASDAQ: MYL) dropped 8 percent, landing it one rung from the bottom of the ladder. WFM, on the other hand, was the index's top gainer on the news, up 19 percent.

S&P 500, 6-month chart

Source: OptionsHouse by E*TRADE

H&R Block (NYSE: HRB) also rallied 14 percent after beating estimates and raising its dividend. Alexion Pharmaceuticals (NASDAQ: ALXN) followed with an 8 percent surge on the heels of positive data for one of its cancer compounds.4

Money continued to trickle away from the broader technology sector following a high-volume selloff on June 9 that was quickly dubbed #techwreck on social media. Metals, including steelmakers and gold miners also slid more than 5 percent.

This week's calendar is pretty quiet, although there are a handful of big-name earnings. Transport giant FedEx (NYSE: FDX) and software maker Red Hat (NASDAQ: RHT) announce results Tuesday afternoon. Wednesday morning features existing-home sales and the Energy Department's oil-inventory report, while Oracle (NASDAQ: ORCL) numbers are due after the close. Thursday brings some European economic headlines early and U.S. jobless claims. New home sales wrap things up Friday.

 

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1. CNBC: Fed hikes interest rates despite declining inflation, sets plan for balance sheet reduction. 6/14/17. Wall Street Journal: Investors Fear Policy Misstep by the Fed. 6/15/17.

2. Reuters: Kroger cuts annual profit forecast, shares tumble. 6/15/17.

3. Bloomberg: Bezos's Grocery Shopping Shakes Up an $800 Billion Industry. 6/16/17.

4. Marketwatch.com: H&R Block shares rally after company beats EPS, sales expectations. 6/13/17. Barron's: The Hot Stock: Alexion Pharmaceuticals Jumps 9.3%. 6/14/17.