Proprietary Trading whipsawed throughout the week, trading in large choppy ranges, driving volatility up to 2014 highs. Price action would have likely been one way if not for the FOMC meeting minutes which showed that the Fed was concerned about global growth. The earning's season kicked off with Alcoa beating on both the top and bottom line, as investors await the next week's deluge of 3Q requests. For the week the S&P 500 index fell 3.14%.
Crude oil prices were a catalyst for a lower energy sector, which was hammered as WTI crude oil dropped $5 per barrel. Prices are facing headwinds because of larger than expected supplies from the U.S. Bakken shale, and OPEC producing at its highest level in years. Demand has also been lower, as Europe and Asia continue to feel the effects of slower economic growth. The XLE Energy ETF was down nearly 4% for the week.
In economic news, the U.S. trade price report revealed the expected September headline hit from falling petroleum import and food export prices, as seen in both July and August, while core trade prices fell 0.2% for exports and 0.1% for imports in September, after flat August readings, alongside 0.2% declines in import prices ex-oil and export prices ex-agriculture.
FOMC Minutes for the meeting on September 16, 17 were more dovish than expected, and that were implied by the higher and steeper trajectory before the Fed considered raising interest rates. Views on the economy and policy were mixed, not surprising, but there seemed to be more agreement over risks to the overall outlook due to slowing global growth.
Policymakers also noted the strong dollar could be a drag on exports, while also tempering inflation pressures. The Fed was also concerned about global growth with an emphasis on Europe, Japan and China. Meanwhile, there was considerable angst over policy communications, with fears that forward guidance was and could be misinterpreted.
The global growth story is going to be an issue until Europe rights their ship. The ECB will need to come to the rescue, and the governments will also need to stimulate economies. The slowdown in German GDP in the second quarter of the year was largely put down to special effects, but no one really though Germany to slide back into recession, but recent data releases have made this apparently a real possibility. The Eurozone's largest economy might escape a technical recession this year, but growth is likely to slow down again in 2015.