PANIC selling on fears of an early exit of the US 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.
In the options market, traders were active in the put weekly options on the S&P 500. These short-term options have a week-long life span and expire on 5 July. Put options are generally viewed as bearish bets against the market.
June’s employment report could offer clues on the timing of the Fed’s 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 per cent from 7.6 per cent.
Manufacturing will also be in the spotlight. The Institute for Supply Management is expected to report today that factory activity expanded in June after contracting in May.
The S&P 500 on Friday posted the best first half of the year since 1998, rising more than 13 per cent in the first six months of 2013, fuelled by US monetary stimulus.
A Reuters survey of 53 investors across the United States, Europe and Japan released on Friday found that funds had already cut their average equity holdings in June to a nine-month low due to recent volatility.