Volatility Builds: Key Fed Meeting & Election This Week

Major U.S. indexes suffered their second straight losing week, even as stocks rebounded on Friday from Halloween’s tech-driven plunge.

Treasury yields reached new four-month highs despite light October job growth, while volatility remained firm ahead of Tuesday’s election. Although the major indexes regained positive momentum on Friday, the S&P 500 index (SPX) rose 23.35 points (0.41%) to 5,728.80, ending the week down 1.37%, and the Nasdaq Composite ($COMP) gained 144.76 points (0.80%) to 18,239.92, ending the week down 1.50%.

The S&P 500 slipped 1.0% in October, breaking a streak of five consecutive monthly gains. Over the past 12 months, it was only the second negative month versus 10 gains. The NASDAQ and the Dow were also negative in October, with those indexes falling 0.5% and 1.3%, respectively.

Earnings momentum remained positive, bolstered by results from the biggest technology companies during the busiest stretch of earnings season.

As of Friday, analysts forecast that third-quarter earnings for all companies in the S&P 500 would rise by an average of 5.1%, based on reported results and forecasts for pending earnings, according to FactSet.

U.S. government bond yields rose for the sixth week out of the past seven, though at a somewhat slower pace. The yield on the 10-year Treasury note closed at 4.37% on Friday—up from 4.24% at the end of the previous week and well above a recent low of 3.62% on September 16.

In addition to Tuesday’s U.S. election, the week will bring a two-day U.S. Federal Reserve meeting that’s scheduled to conclude on Thursday—a departure from the Fed’s typical Tuesday-Wednesday schedule for policy meetings. It’s widely expected that the Fed will approve an interest-rate cut of a quarter percentage point, following the half-point cut made in September.

Based on the upcoming election and the FOMC interest rate decision, expect a week of volatility that could present strong trading opportunities!

In any case, closely monitor the technicals and “Trade What You See, Not What You Think”

Harry Boxer, Author

Veteran Trader, Expert Technical Market Analyst & Founder of TheTechTrader.com