Volatility, Stocks Anxious Ahead Of FED Event

US indices pushed into new all-time highs on Monday which happened to be the first day of November. The Dow Jones Industrial Average closed at 35,913.84 while futures pushed above 36K. the S&P 500 also closed 0.2% higher at 4,613.67 while the Nasdaq composite added 0.6% and closed at 15,595.92.

 

Given the healthy corporate environment, it was no surprise to see a strong rally in small caps with the Russell 2000 gaining 2.6% and earning the title for the best day since late August.

 

All of this is attributed to a strong global recovery, supported by more vaccines and boosters against Covid and the continuous measures that many countries are taking against any potential future spreads.

 

As earnings season continues, it seems that corporate America is enjoying healthy profits despite global supply chain disruptions and concerns. Nonetheless, this week’s FED will likely dictate a different angle to what the markets might do next, according to analysts. Recently, Canada ended its asset purchase program in a move that surprised many but likely created more reasons for the other major central banks to act against rising inflation and improving conditions. This is no different for the US, a country that has been attempting to tackle the same issues.

 

Tomorrow’s comments and potential changes to the bond-buying program are likely to create above-average volatility across the markets. This is evident by the actions seen in the VIX as the index continues to hold higher than usual levels. Despite the new highs, the index moved close to the 18.00 level before dipping lower and ended the day in the mid 16s. This indicates anticipation for fast and volatile markets during the FED’s event.

 

Given the circumstances and according to a large pool of analysts, the FED is expected to taper and discuss future plans related to ending the bond-buying program by mid-next year. Also, the decision could be influenced by expectations for Friday’s NFP.

 

It’s worth noting that the S&P 500 is up 22% so far this year and on track to push new gains, according to traders.

 

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