| NEW YORK, Sept 6
NEW YORK, Sept 6 U.S. stocks could be in for a
jolt of volatility in the week ahead as Congress debates whether
to authorize a military strike against Syria and as the Federal
Reserve's pivotal decision on winding down its stimulus grows
U.S. equity markets have remained on a relatively even keel
recently even as others such as U.S. Treasuries and emerging
markets have been roiled by worries over what the Fed is likely
to do at its meeting later this month and by the Obama
administration's campaign to punish Syria for an alleged
chemical weapons attack against civilians.
After falling 3.1 percent in August, the benchmark Standard
& Poor's 500 rebounded by 1.4 percent in the first week
of September. For the week, the Dow Jones Industrial Average
rose 0.76 percent and the Nasdaq Composite gained
nearly 2 percent.
The CBOE's Volatility Index, or VIX, a proxy for investor
anxiety, fell 7 percent for the week, its largest weekly decline
since mid-July. Its closing level of 15.85 on Friday was near a
two-week low, and the so-called "fear gauge" is within a point
of its average level for the past year, so it is far from
Still, President Obama's efforts to convince reluctant
lawmakers to back his request for a military strike could get
the volatility needles rising. A Senate vote is likely to come
"Next week has the potential to see increased volatility and
perhaps a jump in the VIX," said Tim Ghriskey, chief investment
officer of Solaris Group in Bedford Hills, New York, with $1.5
billion in assets.
The worry for investors would be if a U.S.-led military
strike against Syria escalates into a prolonged conflict,
Ghriskey said. That could be negative for stocks.
"The market will be very susceptible to rumor," said Quincy
Krosby, market strategist at Prudential Financial in Newark, New
Jersey. "The worry is that a surgical strike suddenly changes
and becomes a bigger, wider event."
The fact that the congressional debate over Syria comes on
the effective eve of the Fed's key meeting won't help Wall
Street's mood. The central bank's policy-setting committee meets
on Sept. 17 and 18 and is expected to announced a reduction, or
"tapering," of the pace of its $85 billion a month in bond
purchases that have been instrumental in supporting asset prices
over the past year.The S&P 500 is up 16.1
percent this year.
"If the Fed does taper, it becomes a double whammy,"
If that weren't enough, the question of just who will lead
the Fed after Chairman Ben Bernanke steps down early next year
also creates uncertainty for investors, not to mention another
possible showdown between the White House and Congress over the
federal budget and debt ceiling.
Taken together, these factors could be the mix needed to
spur what many strategists argue is a long-overdue pullback in
"We're poised for the long-awaited correction," said
Margaret Patel, senior portfolio manager at Wells Capital
Management. The S&P has not experienced a 10 percent slide, the
threshold for a technical correction, in more than two years.
LACK OF DIRECTION
Outflows from stock funds in the past three weeks may be
another sign that investors are growing wary of U.S. stocks.
Investors have pulled $15.3 billion out of stock funds in
the past three weeks, the most over any comparable stretch since
August 2011. About $3 billion was pulled from the SPDR S&P 500
ETF Trust, which tracks the S&P 500, marking the largest
outflows from any exchange-traded fund in the weekly period
ended Sept. 4.
Those outflows suggest investors are "concerned about the
future direction of equity markets," said Jeff Tjornehoj, head
of Americas research at Lipper.
"Our sense is just that money is moving onto the sidelines"
said Temple of Pioneer Investments.
The week ahead is relatively light by way of economic data,
with the biggest scheduled release being retail sales for
August, due on Friday. The Reuters consensus forecast calls for
an increase of 0.4 percent from July.
The earnings calendar is also thin, with just two notable
names on the docket: apparel company Phillips-Van Heusen Corp
on Monday and grocer Kroger Co on Thursday.