12/13 ‘The Fed Awakens’ expected this week amid volatility spike
Administrator - Sunday, 13 December 2015 08:00
‘The Fed Awakens’ expected this week amid volatility spike
For about a decade there hasn’t been a new Star Wars movie or a Federal Reserve rate hike, and both are expected to drop this week. And while fanboys will be transfixed on “The Force Awakens,” investor attention will be firmly fixed on “The Fed Awakens.”
The highly anticipated December Federal Open Market Committee meeting comes on the heels of a fresh spike in volatility and falling oil prices. Last week, the Dow Jones Industrial Average DJIA, -1.76% dropped 3.3%, the S&P 500 index SPX, -1.94% fell 3.8%, and the Nasdaq Composite Index COMP, -2.21% shed 4.1%.
On Wednesday, the Fed will end its two-day policy meeting where the central bank is widely expected to raise interest rates for the first time since 2006, and Fed watchers are already trying to anticipate the rate of increases over 2016.
While the Fed meeting will be the centerpiece this week, investors will still be keeping a sharp eye on the falling price of oil and market volatility, according to Jeff Carbone, managing director and co-founder of Cornerstone Financial Partners.
Last week, Oil prices fell 11% and the CBOE Volatility Index VIX, +26.11% the so-called “fear index,” jumped 68%.
With the Fed promising, and not delivering on, a rate hike for more than a year, Carbone still thinks it’s too early. That sort of reluctance was echoed by Chicago Fed President Charles Evans earlier in the month.
One area Carbone points to is the selloff in high-yield debt ahead of the Fed meeting, which places even more strain on energy companies, which make up a large portion of the high-yield debt market. Last week, the S&P 500’s energy sector took the worst hit of the index’s 10 sectors with a 6.5% drop.
“The economy is not strong enough,” Carbone said. “I’m thinking they’re raising rates because they want to, and to get it going so we can move on.”
With headwinds like falling oil prices and a weakening dollar, expect volatility to continue this week right on up to the meeting, he said.
A handful of S&P 500 companies will also report earnings this week:
||Company/ticker (FactSet EPS / revenue estimate)
|Mon., Dec. 14
|Tues., Dec. 15
|Wed., Dec. 16
- Oracle Corp. ORCL, -2.57% (60 cents / $9.06 billion)
- FedEx Corp. FDX, -2.85% ($2.52 / $12.44 billion)
|Thurs., Dec. 17
- Accenture PLC ACN, -2.14% ($1.32 / $7.93 billion)
- General Mills Inc. GIS, -1.16% (83 cents / $4.62 billion)
- Red Hat Inc. RHT, -1.32% (46 cents / $521.5 million)
|Fri., Dec. 18
- Lennar Corp. LEN, -1.75% ($1.11 / $2.98 billion)
- CarMax Inc. KMX, -1.99% (68 cents / $3.64 billion)
- Darden Restaurants Inc. DRI, +0.03% (42 cents / $1.62 billion)