Calm on Wall Street: A turbulent week ends on a placid note

31 Aug 2015 | Author: | No comments yet »

By this measure, stocks have weathered the worst.

new york: Days after China threw the biggest scare into Wall Street in years, US stocks have come surging back and ended the week Friday on a placid note that suggested the worst may be over for now. “I think we saw the bottom with roughly 1,900 S&P 500 support, given the way in which Fed policy support has been both the limit and backstop of stocks for years, and China has not been devaluing since midweek,” said Barry Bannister, chief equity strategist at Stifel U.S.

NEW YORK — U.S. stocks ended little changed, with the Standard & Poor’s 500 Index on track for its worst month since May 2012, as equities found some respite from the wide swings prevalent earlier this week. The Dow Jones Industrial Average fell a scant 11.76 points Friday, or 0.1 percent, to 16,643.01, capping a week that saw stomach-churning losses and gains of around 600 points per day. Equity Research. “By comparing the weekly S&P 500 price to the Fed’s weekly asset holdings, we see a tight plus or minus 2 standard deviations range, which points to 1,900 downside and 2,200 upside for the S&P 500 so long as Fed assets remain flat at around $4.50 trillion.” “I think investors would be wise to prepare for more volatility.

Volatility tends to be cyclical and it definitely appears to be ramping up after a really benign period over the last couple of years,” said Jim Sinegal, an analyst at Morningstar. The CBOE Volatility Index VIX, -0.19% also known as the fear gauge, spiked to a nearly four-year high last week as the stock market recoiled from uncertainties in China. “The current market selloff and spike in volatility is largely attributed to developments in China and uncertainty about the impact of expected Fed hikes,” analyst Marko Kolanovic at J.P. The Fed is watching developments in the China closely to gauge its potential effect on the U.S. economy, Stanley Fischer, the No. 2 official at the U.S. central bank, said on Saturday.

Still, the concerns that triggered the sell-off remain: Slumping oil prices, a slowing Chinese economy, weak corporate earnings forecasts and uncertainty over interest rates. “For the last few years, let’s face it, there’s been very little volatility,” said JJ Kinahan, TD Ameritrade’s chief strategist. “We’ve had a very impressive rally. Not that we can’t go higher, but it’s not going to be an easy path to get there.” Despite the bounce-back this week, stocks are on course for their worst monthly performance in more than three years. About 7.9 billion shares changed hands on U.S. exchanges, 13 percent above the three-month average. “The market just may be tired,” said Cam Albright, head of investment strategy at Wilmington Trust in Baltimore.

Because he recently left his job, Chang has to sell investments he bought with stock options within 90 days — something he can’t do now without taking a big loss. There has been a lot of price action in both directions, perhaps traders just made a chance to catch their breath.” The Chicago Board Options Exchange Volatility Index slipped 0.2 percent to 26.05 Friday. Federal Reserve Vice Chairman Stanley Fischer said Friday that before the recent turbulence, there was a “pretty strong case” for raising rates in September. The index’s 0.9 percent gain for the week masks a volatile period in which the benchmark plunged the most since 2011 to enter a correction, only to rally more than 6 percent over two days. The benchmark index yesterday capped its best two-day rally since the beginning of the bull market in 2009, helped by data showing stronger-than-expected U.S. economic growth.

Global equities had lost as much as $8.4 trillion in value after China’s unexpected devaluation of the yuan earlier this month spurred concern the world’s second-biggest economy was on the brink of a deeper slowdown. “We’re not done with all the volatility in equities,” said Andrew Brenner, the head of international fixed income for National Alliance Capital Markets. “I think the worst is over, but are we out of the woods yet?

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