Wall Street Week Ahead: Markets could turn choppy as Fed, Syria risks mount

Fri Sep 6, 2013 10:55pm EDT
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By Sam Forgione

NEW YORK (Reuters) - U.S. stocks could be in for a jolt of volatility in the week ahead as Congress debates whether to authorize a military strike against Syria and as the Federal Reserve's pivotal decision on winding down its stimulus grows near.

U.S. equity markets have remained on a relatively even keel recently even as others such as U.S. Treasuries and emerging markets have been roiled by worries over what the Fed is likely to do at its meeting later this month and by the Obama administration's campaign to punish Syria for an alleged chemical weapons attack against civilians.

After falling 3.1 percent in August, the benchmark Standard & Poor's 500 .SPX rebounded by 1.4 percent in the first week of September. For the week, the Dow Jones Industrial Average .DJI rose 0.76 percent and the Nasdaq Composite .IXIC gained nearly 2 percent.

The CBOE's Volatility Index, or VIX, a proxy for investor anxiety, fell 7 percent for the week, its largest weekly decline since mid-July. Its closing level of 15.85 on Friday was near a two-week low, and the so-called "fear gauge" is within a point of its average level for the past year, so it is far from elevated.

Still, President Obama's efforts to convince reluctant lawmakers to back his request for a military strike could get the volatility needles rising. A Senate vote is likely to come next week.

"Next week has the potential to see increased volatility and perhaps a jump in the VIX," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York, with $1.5 billion in assets.

The worry for investors would be if a U.S.-led military strike against Syria escalates into a prolonged conflict, Ghriskey said. That could be negative for stocks.

"The market will be very susceptible to rumor," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "The worry is that a surgical strike suddenly changes and becomes a bigger, wider event."   Continued...

A trader works on the floor of the New York Stock Exchange shortly before the end of the day's trading in New York July 31, 2013. REUTERS/Lucas Jackson