Volatility in US markets ahead of key earnings - New York Report

VOLATILITY has suddenly returned to US stocks, and for the first time all year it doesn’t appear that the weakness in equities will go away quietly in the span of a few days.

While the S&P 500 is still up 3.1 per cent for the year, the index is off about five per cent from its record high reached in mid-September, and closed last week at the lowest level since 23 May.

Growing worry over Europe and other overseas economies has money managers concerned about earnings season. The next two weeks bring a slew of US corporate results, including from S&P 500 companies with some of the highest levels of sales abroad, such as chip maker Intel.

Investors have said they are concerned about the eventual end of Federal Reserve stimulus, as well as weak growth overseas and its potential effect on US earnings.

The S&P 500 and Nasdaq posted their biggest weekly declines since May 2012 last week, and the Dow Jones industrial average ended Friday in negative territory for the year.

The volatility recalls the last major period of big market gyrations in the second half of 2011, when the first-ever credit downgrade of the United States and the threat of a debt default kept investors on their toes for several months. It is unclear whether the current turmoil will last as long.

One sign that investors anticipate more volatility has been in the options market, where volumes have increased sharply. Friday marked the busiest day in the options market since June 2013.