Wall Street Week Ahead: Fed fears may be gone but brace for volatility
By Angela Moon
NEW YORK (Reuters) - Panic selling on fears of an early exit of the U.S. Federal Reserve's stimulus efforts may be over, but the stock market may still face wild intraday swings as investors scramble to position themselves for Friday's payrolls report.
Trading volume is likely to be thin, with a half-day session on Wednesday and markets closed for the Independence Day holiday on Thursday. Both the Labor Department's weekly jobless claims and employment report for June will be released at 8:30 a.m. (1230 GMT).
"Non-farm payrolls generally cause more volatility in the market, but how many times do you see weekly claims and payrolls coming out the same day on a shortened trading week? That will certainly cause a lot of volatility," said Randy Frederick, managing director of trading and derivatives at Charles Schwab & Co Austin, Texas.
In the options market, traders were active in the put weekly options on the S&P 500 .SPX. These short-term options have a week-long life span and expire on July 5. Put options are generally viewed as bearish bets against the market.
"We've seen some buying pop up in the weeklies for next week. The most active ones are the 1,600 puts on the SPX," said JJ Kinahan, chief strategist at online brokerage firm TD Ameritrade in Chicago.
"We will probably see more hedging activity early next week and perhaps higher intraday swings as people try to figure out their option positions going into the holiday with the employment report due the next day."
June's employment report could offer clues on the timing of the Fed's eventual tapering of its bond purchases. Non-farm payrolls are expected at 170,000, below the 194,000 six-month moving average. The unemployment rate is seen dipping to 7.5 percent from 7.6 percent.
Manufacturing will also be in the spotlight next week. The Institute for Supply Management is expected to report on Monday that factory activity expanded in June after a surprise contraction in May. Continued...