By Wallace Witkowski
SAN FRANCISCO (MarketWatch) -- U.S. stocks may turn volatile in
the coming week as uncertainty over the Federal Reserve's
quantitative easing could trump investor expectations about midterm
elections, jobless figures and corporate earnings.
The central bank's key Federal Open Market Committee is set to
convene its eighth meeting of the year Tuesday even as U.S. voters
go to the polls. As investors digest the election results the
following day, the Fed will wrap with an interest rate policy
statement and investors will be on the lookout for indications of
how much new money policy-makers plan to pump into the economy.
"The only guarantee we have next week is there's going to be
volatility in the markets," said Michael Sadoff, an investment
adviser for Sadoff Investment Management. "My advice is that
investors should not get too caught up in the short term as a lot
of cross currents are going to hit on the same day."
Look for the Fed to go with a quantitative-easing package of
$500 billion to $1 trillion, Sadoff says. Any significant deviation
on either side of that range may disappoint investors seeking
short-term results from the central bank, he added.
Channing Smith, co-manager of the Capital Advisors Growth Fund,
said investors could be upset if the announced policy is too lean,
or under $300 billion, given that an anticipated large Fed purchase
of assets has already been priced into markets in recent weeks.
"We don't expect shock and awe," Smith said. "QE II is likely
going to be a measured and very conservative program. Details will
be vague but the message will continue to be that the Federal
Reserve has the stock market's back."
Any amount of stimulus, however, will do little unless it shows
tangible results, Smith added, noting that the first round of
quantitative easing worth $1.7 trillion in asset purchases resulted
in a mere 2% growth in the U.S. economy.
Other factors to monitor next week are rising credit-default
swap prices on European sovereign debt, and whether this week's
declines in the China Shanghai Composite Index will continue, Smith
said.
Also, ISM manufacturing data for October will be released
Monday, October U.S. auto sales will come out on Wednesday, and
jobless claims data will be released on Thursday.
More earnings
More than 300 companies in the S&P 500 have reported
quarterly results in recent days, and 77% of them surpassed Wall
Street expectations; only 17% came in below estimates, according to
Thomson Reuters. Since the beginning of earnings season on Oct. 8,
the S&P 500 Index (SPX) has risen 2.2%.
On deck next week for corporate earnings, Dow components Pfizer
Inc. (PFE) and Kraft Foods Inc. (KFT) will report on Tuesday and
Thursday, respectively. Monday will bring results from Humana
Inc.(HUM), Baker Hughes Inc.(BHI), Corning Inc.(GLW), and Anadarko
Petroleum Corp. (APC).
Also on Tuesday, Archer Daniels Midland Co.(ADM), MasterCard
Inc.(MA) and Electronic Arts Inc. (ERTS) will release their
quarterly results.
CVS Caremark Corp.(CVS), Time Warner Inc.(TWX), News Corp.(NWSA)
and Aetna Inc. (AET) are due to report on Wednesday. CBS Corp.
(CBS) is on Thursday's docket, and Washington Post Co. (WPO) is
expected to post results on Friday.