It may not have been a pretty finish but the stock market’s Friday performance was enough to hand Wall Street bulls their third straight weekly gain.
Health care and materials again led on the way up, although gains have been relatively broad-based, including gains in eight of the S&P 500’s (SPX) 10 sectors. SPX is now back at levels seen in the third week of August, before a massive selloff across the board eroded year-to-date gains. Resistance may come in at 2,060, which marks the 200-day moving average (figure 1). SPX remains off some 1% year to date.
The market’s “fear gauge,” the CBOE Volatility Index (VIX) is nearing a test back down near 15, flirting with a return to the long-running sub-15 lows that characterized its trading through much of early 2015. On its way back to near 15, VIX has shed some 29% in just the last three weeks.
This multi-week result could set the market on positive footing as the Street faces a week heavy with more earnings news and several housing market reports (see the full calendar below). Housing, of course, is a key measure of big-ticket consumer spending. Home sales had been trending up but not at a pace that most economists might expect at this point in the expansion. Wall Street also wants to see if housing figures reflect a steady, but moderating, clip of hiring in the past few months.
GM Humming Along?
Earnings in the coming week span the likes of Coca-Cola (KO), Biogen (BIIB), Boeing (BA), and General Motors (GM), among others.
GM may be of big interest to traders, and not only those looking to buy or sell its shares, because of its known relationship with Chinese markets. Of course, China’s reported waning overall spending and its broader economic slowdown had been widely cited in driving market volatility in the late summer before relative stability returned in October.
Fed, Up Next
Earnings and economic news collectively matter because they could impact Federal Reserve decision-making come October 29 and the rest of the year.
The Fed funds futures market is currently pricing in a 6% chance for a rate increase this month—well below the strong odds for such a move priced in just a few weeks ago. Meanwhile, hawkish comments from the Fed officials seemed to have little impact on market expectations. In a Thursday speech, Cleveland Fed President Loretta Mester said the U.S. economy “can handle” an increase in interest rates, despite the risks around its outlook.
Stay tuned, pre-Fed week could prove just as interesting as Fed week.
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