07.25.2016
By John D'Antona

TRADING THE WEEK: Earnings, FOMC Statement on the Docket

The upcoming trading week shapes up as a ‘wait-and-see’ type, as the summer doldrums may give way to real news that could define the summer trading dynamic.

Traders can expect a plethora of earnings reports from a Who’s Who of the largest companies. Quarterly announcements from consumer behemoths Apple, 3M, UPS, Anheuser-Busch and McDonald’s get the ball rolling on Tuesday. Tech bellwethers Alphabet, Amazon, Facebook are also set to report. Rounding out the week are energy refiners and producers Chevron and ExxonMobil.

“It’s been a real quiet market out here so far and going into this week we expect more,” said a buy-side trader in Chicago. “Volatility has come down and so have trading volumes, but next week gives us some fresh news to chew on – and hopefully some trading opportunities.”

On Wednesday, the CBOE Volatility Index closed at 11.77, the lowest since August 2014. On Friday the VIX climbed slightly to 12.18.

In the midst of the earnings onslaught is the Federal Reserve. The Federal Open Market Committee begins its two-day deliberation on Tuesday, and will make its policy statement on interest rates on Wednesday afternoon.

Traders Markets Media spoke with expect the FOMC to leave interest rates unchanged, not risking to destabilize the markets during the summer vacation season but potentially setting the stage for a fall move.

This follows the recent decision by the Bank of England to hold the UK’s main interest rate at 0.5%, which surprised some who were hoping for a rate cut after the Brexit vote and move away from the European Union.

“We don’t expect a rate move this week,” began one trading head in New York. “But, the Fed is running out of time to move as we approach the November election. it does not want to seem politically biased and will have a limited opportunity to make a policy move either in August or September. October is just too close unless the jobs numbers or inflation data make a large move.”

On the jobs front, initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 253,000 for the week ended July 16, the lowest reading since April, the Labor Department said last Thursday. According to economists, jobless claims are running at the lowest levels seen in 40 years. Also, weekly jobless claims have been below the benchmark level of 300,000 for almost a year and a half. Claims over 300,000 are often interpreted to mean the labor market is weak.

Volume traded on U.S. equity exchanges averaged 6.05 billion shares per day for the week ended July 22, according to Bats Global Markets data. That’s down from an average of 6.83 billion shares in the week ending July 15.

 

This Week’s U.S. Economic Indicators of Interest:

Monday Dallas Fed Manufacturing Index
Tuesday RedBook Retail Sales

New Home Sales

FOMC Meeting Begins

Consumer Confidence

Richmond Fed Manufacturing Index

Wednesday Durable Goods Orders

Existing Home Sales

FOMC Policy Statement

Thursday Weekly Jobless Claims
International Trade
Friday GDP

Chicago PMI

Consumer Sentiment

 

 

 

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