US stocks are likely to face another week of rising turbulence as efforts to settle the budget dispute in Washington drag on, leaving investors worried about the more critical issue of raising the US debt ceiling.
The budget impasse has led to a partial US government shutdown for nearly a week, already longer than many investors had expected.
Economists fear the shutdown could threaten the fragile economic recovery or even push it back into recession.
While stocks ended higher on Friday, the S&P 500 posted a loss for the week and the CBOE Volatility index – the market’s fear index – rose to 16.89, up from 13.12 on 21 September. The index is still at relatively low levels, but options-market trading suggests investors are starting to guard against increased volatility.
This week, data from independent providers including the Thomson Reuters/University of Michigan survey of consumer sentiment are still expected, in addition to minutes from the last Fed meeting.
And investors will see the first of third-quarter earnings from top S&P 500 companies in the coming week, including results from JP Morgan Chase and Wells Fargo.
The forecast for third-quarter earnings has come down sharply in recent weeks – growth now is expected at just 4.5 per cent – but financials are expected to lead S&P 500 profit growth for the quarter, with a gain of 9.5 per cent, according to Thomson Reuters data.
Results from Alcoa are due this week as well.