How to Play Stocks Around the Fed Today

Last week I published an article entitled Buy this Trough as the Latest Fed Scare is Unfounded. I continue to expect the Federal Reserve’s FOMC monetary policy decision and press conference to reflect the mild message conveyed by Janet Yellen in her Jackson Hole speech and for stocks to move higher. However, the Fed Forecasts, which will be published today, have sunk stocks in the past and continue to threaten, though perhaps to a lesser extent now that they are better understood. Passive investors in the broader market ETF, the SPDR S&P 500 (NYSE: SPY) might want to hedge bets a bit. This article discusses tools for hedging event risk. Rather than placing a long or short bet on the SPY today, I suggest investors hold both call and put options to bet on volatility in the security, whether it move higher or lower. Your risk comes with the lack of a move in the SPY, but if the ETF rises or falls significantly, you should overcome option costs for profit today in my view. Of course, this trade offers lower upside than a naked long or short position. See the full report here.

THIS WEEK: You Had Better Fear Janet Yellen

Fed Chair Yellen Testifies Before Congress this Week

This week, you had better fear Janet Yellen, because she has the ability to determine the fate of your trades. When she testifies before Congress Tuesday and Wednesday, what she says under fire will determine everything. And that’s really the key here, as no matter what her prepared statements indicate, proud vote-seeking Congressmen are going to push her to answer tough questions about the Fed’s plan for interest rates. She could slip up where Ben Bernanke usually didn’t, and give away her poker hand. If she indicates the Fed could raise rates sooner than expected, or even as early as the start of 2015, sell as fast as you can and go away for six months to a year.

Security	Year-to-Date	Last 12 Months
SPDR S&P 500 (NYSE: SPY)	+7.0%	+18.0%
SPDR Dow Jones (NYSE: DIA)	+2.9%	+10.5%
PowerShares QQQ (Nasdaq: QQQ)	+9.0%	+27.3%
SPDR Gold Shares (NYSE: GLD)	+8.3%	+1.3%
iPath S&P Crude Oil (NYSE: OIL)	+5.9%	-1.3%

After a rough week last week, stocks started the latest period on the upside thanks to strong data from Citigroup (NYSE: C).

This Week

Whether the market realizes it yet or not, the week ahead hinges on what Janet Yellen says on Tuesday and Wednesday when she testifies before Congress. If she offers more lip service about interest rates and the Fed’s lack of plans to raise them, stocks will be supported. However, she is unpredictable, or not as predictable as Ben Bernanke was. Given recent revelations from Fed representatives including James Bullard, who have indicated a preference to begin raising rates at the start of 2015, Yellen is capable of communicating that as a possibility. Should she do that, we’ll see stocks tank like they did last week.

Other data takes a back seat to Yellen, but we will receive some important information on the consumer in the form of monthly Retail Sales and Housing Starts. Look for inflation news as well out of the PPI data and the Atlanta Fed’s report. Leading indicators at the close of the week should be critical too, given recent GDP contraction versus forward expectations for strong growth. Unfortunately, James Bullard has the last say from the Fed this week, so no matter what happens the message could change by then.

THIS WEEK’S ECONOMIC REPORT SCHEDULE
Economic Data Point	Prior	Expected
MONDAY
ECB President Draghi Address to EP
TUESDAY
ICSC Weekly Store Sales
-Year-to-Year Pace
Redbook Store Sales
Retail Sales	0.3%	0.6%
-Less Autos & Gas	0.0%	0.5%
Empire State Mfg. Index	19.28	17.8
Business Trade - Inventory
-Sales
Trade Prices - Exports	0.1%	0.2%
-Imports	0.1%	0.4%
Janet Yellen Testimony
WEDNESDAY
Mortgage Activity
EIA Petroleum Status
-Crude Oil Inventory
-Gasoline Inventory
Housing Market Index	49	51
Industrial Production	+0.6%	+0.4%
-Capacity Utilization	79.1%	79.2%
TIC – Foreign Demand LT US Sec.
Janet Yellen Testimony
Beige Book
Atlanta Fed Biz Inflation Expectations
Richard Fisher Speaks
Producer Price Index	-0.2%	+0.3%
-Core PPI	-0.1%	+0.2%
China Reports on Retail Sales
THURSDAY
Weekly Jobless Claims	304K	310K
EIA Natural Gas Report
Housing Starts	1.001 M	1.026 M
-Permits	0.991 M	1.038 M
Philly Fed Index	17.8	16.9
St. Louis Fed Bullard Speaks
FRIDAY
Leading Economic Indicators	0.5%	0.5%
Consumer Sentiment	82.5	83.0

Earnings season is swinging into full force this week, as the major banks report. The period includes heavy weights in all sectors though, and the entire list follows here.

EPS REPORTS
Company	Ticker
MONDAY
CitiGroup	NYSE: C
Acacia Research	Nasdaq: ACTG
Accretive Health	Nasdaq: ACHI
Akers Biosciences	Nasdaq: AKER
American Airlines	NYSE: AAL
Bank Mutual	Nasdaq: BKMU
Bank of Ozarks	Nasdaq: OZRK
Charles Schwab	Nasdaq: SCHW
Chemical Financial	Nasdaq: CHFC
Cohen & Steers Quality Income R.F.	NYSE: RQI
First Bancorp	Nasdaq: FNLC
GATX	NYSE: GMT
Global Geophysical Services	Nasdaq: GEGSQ
Heartland Express	Nasdaq: HTLD
Hertz Global	NYSE: HTZ
Hingham Institution for Savings	Nasdaq: HIFS
ICU Medical	Nasdaq: ICUI
JAKKS Pacific	Nasdaq: JAKK
MagnaChip Semiconductor	NYSE: MX
Marten Transport	Nasdaq: MRTN
MB Financial	Nasdaq: MBFI
Microfinancial	NYSE: MFI
Omnicom	NYSE: OMC
Oxygen Biotherapeutics	Nasdaq: OXBT
Peregrine Pharmaceuticals	Nasdaq: PPHM
Piper Jaffray	NYSE: PJC
Rambus	Nasdaq: RMBS
Riverbed Technology	Nasdaq: RVBD
Saba Software	Nasdaq: SABA
Scholastic	Nasdaq: SCHL
SEI Investments	Nasdaq: SEIC
SemiLEDs	Nasdaq: LEDS
Spectrum Group Int’l	Nasdaq: SPGZ
Stanley Furniture	Nasdaq: STLY
Taylor Capital Group	Nasdaq: TAYC
TravelCenters of America	NYSE: TA
Whirlpool	NYSE: WHR
Wintrust Financial	Nasdaq: WTFC
WNS	NYSE: WNS
TUESDAY
J.P. Morgan Chase	NYSE: JPM
Goldman Sachs	NYSE: GS
Intel	Nasdaq: INTC
Yahoo	Nasdaq: YHOO
Johnson & Johnson	NYSE: JNJ
CSX	NYSE: CSX
AAR	NYSE: AIR
ADTRAN	Nasdaq: ADTN
Boston Private Financial	Nasdaq: BPFH
Cintas	Nasdaq: CTAS
Comerica	NYSE: CMA
Commerce Bancshares	Nasdaq: CBSH
Interactive Brokers	Nasdaq: IBKR
J.B. Hunt Transport	Nasdaq: JBHT
Miller Energy Resources	Nasdaq: MILL
Pinnacle Financial Partners	Nasdaq: PNFP
Renasant	Nasdaq: RNST
Washington Federal	Nasdaq: WAFD
Westamerica Bancorporation	Nasdaq: WABC
Wolverine World Wide	NYSE: WWW
WEDNESDAY
Yum! Brands	NYSE: YUM
Abbott Labs	NYSE: ABT
eBay	Nasdaq: EBAY
Bank of America	NYSE: BAC
U.S. Bancorp	NYSE: USB
PNC Financial Services	NYSE: PNC
Blackhawk Network	Nasdaq: HAWK
BlackRock	NYSE: BLK
Cohen & Steers	NYSE: CNS
Diamond Hill Investment	Nasdaq: DHIL
Doral Financial	NYSE: DRL
East West Bancorp	Nasdaq: EWBC
El Paso Pipeline	NYSE: EPB
FBR & Co.	Nasdaq: FBRC
First Republic Bank	NYSE: FRC
HNI Corp.	NYSE: HNI
iGATE	Nasdaq: IGTE
Kinder Morgan Energy Partners	NYSE: KMP
Kinder Morgan Inc.	NYSE: KMI
Kinder Morgan Management	NYSE: KMR
Las Vegas Sands	NYSE: LVS
MGIC Investment	NYSE: MTG
Nord Anglia Education	Nasdaq: NORD
Northern Trust	Nasdaq: NTRS
Platinum Underwriters	NYSE: PTP
Plexus	Nasdaq: PLXS
RLI	NYSE: RLI
SanDisk	Nasdaq: SNDK
Select Comfort	Nasdaq: SCSS
St. Jude Medical	NYSE: STJ
Textron	NYSE: TXT
United Rentals	NYSE: URI
Universal Forest Products	Nasdaq: UFPI
THURSDAY
Google	Nasdaq: GOOG
Google	Nasdaq: GOOGL
Morgan Stanley	NYSE: MS
Advanced Micro Devices	NYSE: AMD
Alliance Data Systems	NYSE: ADS
American National Bankshares	Nasdaq: AMNB
American River Bankshares	Nasdaq: AMRB
Associated Banc-Corp	Nasdaq: ASBC
Athenahealth	Nasdaq: ATHN
AutoNation	NYSE: AN
B&G Foods	NYSE: BGS
Baker Hughes	NYSE: BHI
BancFirst	Nasdaq: BANF
Baxter Int’l	NYSE: BAX
Blackstone	NYSE: BX
Capital One Financial	NYSE: COF
Celanese	NYSE: CE
Cepheid	Nasdaq: CPHD
CoBiz Financial	Nasdaq: COBZ
Cypress Semiconductor	NYSE: CY
Cytec Industries	NYSE: CYT
Danaher	NYSE: DHR
Dover	NYSE: DOV
Eastgroup Properties	NYSE: EGP
Electronics for Imaging	Nasdaq: EFII
Fairchild Semiconductor Int’l	NYSE: FCS
Fifth Third Bancorp	Nasdaq: FITB
First Cash Financial	Nasdaq: FCFS
Glimcher Realty Trust	NYSE: GRT
Home BancShares	Nasdaq: HOMB
Home Loan Servicing	Nasdaq: HLSS
Hub Group	Nasdaq: HUBG
Independent Bank	Nasdaq: INDB
Insteel Industries	Nasdaq: IIIN
IBM	NYSE: IBM
M&T Bank	NYSE: MTB
Mattel	NYSE: MAT
Matthews Int’l	Nasdaq: MATW
Navient	Nasdaq: NAVI
Neogenomics	NYSE: NEO
NetScout Systems	Nasdaq: NTCT
Orbital Sciences	NYSE: ORB
People’s United Financial	Nasdaq: PBCT
Philip Morris Int’l	NYSE: PM
Pool Corp.	Nasdaq: POOL
PPG Industries	NYSE: PPG
Premiere Global Services	NYSE: PGI
PrivateBancorp	Nasdaq: PVTB
Republic Bancorp	Nasdaq: RBCAA
Resources Connection	Nasdaq: RECN
Sandy Spring Bancorp	Nasdaq: SASR
SAP AG	NYSE: SAP
Schlumberger NV	NYSE: SLB
Seagate Technology	NYSE: STX
Sherwin-Williams	NYSE: SHW
Simmons First National	Nasdaq: SFNC
Skyworks Solutions	Nasdaq: SWKS
Snap-On	NYSE: SNA
Sonoco	NYSE: SON
Stryker	NYSE: SYK
Syntel	Nasdaq: SYNT
Travelzoo	Nasdaq: TZOO
Ultratech	Nasdaq: UTEK
United Security Bancshares	Nasdaq: UBFO
UnitedHealth Group	NYSE: UNH
Valmont Industries	NYSE: VMI
W.W. Grainger	NYSE: GWW
Watsco	NYSE: WSO
Webster Financial	NYSE: WBS
Western Alliance Bancorporation	NYSE: WAL
WNS	NYSE: WNS
FRIDAY
General Electric	NYSE: GE
Honeywell	NYSE: HON
Johnson Controls	NYSE: JCI
Autoliv	NYSE: ALV
Badger Meter	NYSE: BMI
Bank of New York Mellon	NYSE: BK
First Horizon National	NYSE: FHN
Huntington Bancshares	Nasdaq: HBAN
Interpublic Group of Cos.	NYSE: IPG
Kansas City Southern	NYSE: KSU
Knoll	NYSE: KNL
Laboratory Corp. of America	NYSE: LH
VF Corp.	NYSE: VFC

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.