11.01.2016
By John D'Antona

TRADING THE WEEK: Upcoming Jobs Report, Election Limit Activity

It was almost quiet enough to hear a pin drop.

Almost, one trader said.

The US equity markets endured a week with mild economic reports and mild interest as volatility remained low ahead of next week’s crop of economic data reports and the Nov. 8 Presidential election.

Last week saw lackluster trading activity as neither the Federal Reserve speakers nor the marquee data report, the initial reading for third quarter GDP failed to goose traders into taking on new positions or altering existing ones. GDP, which was released last Friday, showed a rate of 2.9% but was skewed by a jump in soybean exports – not much for traders to hang their hats on. Also, consumer spending data within the report dropped to 2.1% from 4.3% during the prior quarter.

“Today’s (Friday GDP report) release will likely improve the perception of economic conditions in the U.S. and slightly increase the odds of a Democratic president remaining in the White House,” Brian Schaitkin, senior economist at The Conference Board, said in a statement.

“It remains to be seen whether such a result will calm the nerves of hesitant executives,” he added. “Regardless of the outcome of the election, the environment for investment remains weak due to a combination of higher wages and weak pricing power for firms, which have caused profits to decline during the past two years.”

Traders concurred adding the report failed to generate much interest and shouldn’t affect growing market consensus that the Federal Reserve won’t move interest rates ahead of the election when it meets this week. According to research from the CME Group, the Fed will leave rate unchanged – however, it will likely signal a willingness to increase rates at its December meeting. Pricing in the futures market shows that traders see a 74% chance that the central bank will raise rates by December, they group reported.

“It was a really quiet week with a whole lot of nothing going on,” lamented a floor trader, describing last week. “We’re beginning to settle into the ‘Election Day’ trade with some minor jockeying around but nothing wholesale going on.”

Also, contrary to one trader’s hopes, last week’s Q3 earning numbers, which included 262 U.S companies, failed to stir much interest.

There was a mini-burst of trading interest early Friday afternoon, when news broke that the FBI was re-opening an investigation into Hillary Clinton’s e-mail server. That sent the markets lower, if only briefly. But, it was an indication of further election-related volatility ahead.

Trading on U.S. equity exchanges averaged 6.46 billion shares per day for the week ended October 28, according to Bats Global Markets data. That’s up from an anemic average of 5.84 billion shares in the week ending October 21.

Looking ahead, next week’s dearth of market moving economic data is likely to prolong a lack of activity. However, Friday’s employment report could stir things up.

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

Monday Personal Income

Chicago Purchasing Managers

Dallas Fed Manufacturing Survey

Fed’s William Dudley Speaks

Tuesday Redbook Retail Sales

FOMC Meeting Begins

Construction Spending

 

Wednesday FOMC Meeting Announcement
Thursday Jobless Claims

Factory Orders

 

Friday

Unemployment Report

International Trade

 

More on Trading:

  • Keeping the Trader in Machine Learning
  • Buy Side Looks to Fill Market-Making Vacuum
  • Treasuries May Get ‘Reg ATS’d’

 

 

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