Well, we have been asking for some time now, "What are the catalysts that will bring some volatility back to the market?" Tunisian-inspired protests hit Egypt, spurring a horrendous week from Egyptian stocks and regional ETFs. Disappointing quarters for notable names such as Ford (F), Amazon.com (AMZN) and Microsoft (MSFT). The VIX, dollar, yen, gold, silver and oil all had stellar days. Everything else? Not so much.
The Dow Jones Industrial Average ended down 166.13 points, or 1.39%, to close at 11,823. The S&P 500 fell 23.20 points, or 1.79%, to close at 1276, and the NASDAQ was down 69.39 points, or 2.48%, to finish at 2686.
The CBOE Volatility Index (VIX) closed up 20.09%, at 20.04, on overall put volume of 154,000 contracts compared to 329,000 call contracts, with February 20 calls as the most active series. 60 and 90-day implied volatility moved higher to with the reversal to trade at 76 and 69, respectively, indicating decreasing price movement in the outer months.
SPDR S&P 500 ETF (SPY) traded 2.4x the normal daily volume to close down $2.27, at $127.72, on overall put volume of 2.61 million contracts compared to 1.16 million call contracts. 60 and 90-day implied volatility is 17, indicating little price movement in the outer months.
The PowerShares QQQ Trust (QQQQ) traded 2.1x is normal daily volume to close down $1.45, on overall put contract volume of 521,000 contracts compared to 332,000 call contracts, with March 55 puts as the most actively traded series. 60 and 90-day implied volatility is at 20, suggesting little price movement in the outer months.
Looking ahead to the week of January 31, we are done w/the most "systemically" important earnings (i.e. the big industrials, tech and bank results). Even though there are still a slew of results to come, the more important sectors/companies have reported. 70% of companies that have reported earnings this season have beaten revenue estimates. The Health Care sector has the highest revenue beat rate so far this earnings season at 85.7%. Health Care is followed by Industrials (77.3%), Energy (76.5%), and Technology (70.6%). Next week, watch for a shift towards media, life insurance and European financials. Bernanke will be speaking to the National Press Club on Thursday, February 3 to explain this past Wednesday's FOMC decision. Finally, January economic data points will be released next week, including PMIs from China and the U.S., but the most important will be the U.S. jobs report on Friday, February 4. Most economic data have shown nice improvement, but this has not been the case with jobs.
The following notable companies are reporting the week of January 31: Monday before the open: CHKP, GCI, ITW, SOHU, WDR, XOM; after the close: APC, BCR, BIDU, CAVM, EXTR, IDTI, IRF, MCK, MTW, NVLS, PCL, RGA, WDR; Tuesday before the open: ADM, AMG, ARM, AAXE, BIIB, BP, CE, CMI, COCO, COV, CVLT, EMN, EMR, HNT, IFNNY, KLIC, LSTR, LXK, MHP, PFE, PNR, TUP, UPS; after the close: ADS, AFL, AJG, APKT, BBND, BRCM, BSX, CCUR, ERTS, FORM, JDAS, MANH, MEE, NLC, PLT, UIS, WFR, WBSN, WU; Wednesday before the open: ANFGY, AOL, ARW, ATMI, AVY, CAM, CNW, CVG, HSP, HSY, IACI, LVLT, LZ, MAN, MAT, MRO, NDAQ, NMR, NVO, RHHBY, TMO, TWX, WHR; after the close: ACE, AIZ, AMP, AVB, BMC, CDNS, CINF, CYMI, HIG, ISIL, NETL, NWS, OTEX, RNOW, SFLY, THQI, TSO, UNM, V, YUM; Thursday before the open: AMB, AN, ARJ, BCO, BDC, BX, CAH, CI, CME, CVS, DB, DO, DOW, EL, GR, GSK, HAR, HOT, IP, ITG, K, MA, MCO, MF, MRK, NOV, NYT, ONNN, PENN, R, RAI, RDS, SNE, UN/UL, VIA; Friday before the open: ABC, AET, AIV, AON, AVID, CLX, MGI, PHM, SPG, TDW, TSN, WY
Economic Data for the week of January 31: Monday: December Personal Income, December Personal Spending, December PCE Prices-Core and the January Chicago PMI; Tuesday: December Construction Spending, January ISM Index and February Auto and Truck Sales; Wednesday: MBA Mortgage Purchase Index, January Challenger Job Cuts, January ADP Employment Change and Crude Inventories; Thursday: Preliminary Q4 Productivity, Q4 Unit Labor Costs, 1/29 Initial Claims, December Factory Orders, January ISM Services and Retail comps; Friday: Employment Report and Treasury STRIPS.
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