This is What Volatility Feels Like


Up one week, down the next. In case you forgot, this is what volatility feels like.

The S&P 500 slid 2 percent between Friday, February 23, and Friday, March 2. That would have been a big deal back in 2017, when its biggest weekly drop stayed below 1.5 percent. But this year has a different kettle of fish after the index soared to new records in January and cratered in early February. It has tried to bounce more recently, but we’re still in the midst of our longest spell without a new 52-week high since May.

It’s not like the economic data was bad — far from it. Manufacturing and consumer confidence hit their best strides in over a decade, personal incomes rose more than expected and the fewest Americans were out of work since the days of the Beatles.

But maybe, as noted on February 22, all the good news was already priced in. Maybe investors are now more prone to worry about a hawkish Federal Reserve or protectionism after President Trump slapped tariffs on foreign steel. Or, maybe the market was just tired and after months of weak internals. Either way, volatility and ranges are back.

The prospect of trade wars definitely hit sentiment, but there were other negative headlines. Chinese equities, for instance, slid after an apparent power grab by President Xi Jinping. Oil traders sweated about rising crude supplies and housing continued to struggle as soaring interest rates worsened an inventory shortage.

Every major sector declined last week. Materials led to the downside with a drop of almost 4 percent. Industrials were second-worst, with global stocks and homebuilders wallowing alongside. Only technology, the strongest bucket in the S&P 500 for over a year, staved off a drop of at least 1 percent.

Retailers were the big story in earnings. And, they mostly disappointed. Foot Locker (FL) cratered 17 percent, Lowe’s (LOW) dropped 12 percent and L Brands (LB) fell 11 percent. Macy’s (M) and TJX (TJX), however, rallied on strong results. (CRM), the main tech to report, advanced.

This week’s calendar keeps the focus on macro themes like jobs and interest rates. There are also more retail earnings.

Today’s main item is the Institute for Supply Management’s service-sector index… yawn. Tuesday’s less of a snooze, with factory orders and results from Target (TGT), Autodesk (ADSK), Ross Stores (ROST) and Ciena (CIEN).

Wednesday’s busy. ADP’s private-sector payrolls report comes first, then oil inventories from the Energy Department and the Fed’s Beige Book survey of economic conditions. Costco (COST) reports, as well.

Eyeballs jump across the Atlantic Thursday morning to the European Central Bank’s interest rate decision. Then they shoot back to Washington for weekly jobless claims.

It all ends with the big kahuna of non-farm payrolls Friday morning.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.