Fears Over Major Fast Food Holding Confirmed By Triple Miss

How do you explain a day when stocks move 30 points straight down, rally 100 points by late afternoon and then sink 90 points by the close, which happened last Thursday? That is what you call volatility. Remember, high volatility simply means the stock market range expands and the bounds or limits (perceived) are higher and lower than normal.

As background information, the VIX had risen about 40% from very low teens in early July. As risk-averse investors and traders, we abhor such large moves as they make us very uncomfortable. Now, big moves happen in both directions, but we tend to feel more pain when markets are going down sharply than we do joy when they are going up. In that case, we tend to have a sense of relief rather than elation (during a volatility storm).

What can we expect this week? Of course, with a Fed meeting, big earnings, the end of the month and an important job report coming, the volatility is here to stay. However, as the news is passed on during the week, we may actually see recently high volatility levels recede! Why is that? Well, volatility rises on the expectation of the unknown, and when we finally have Fed decision, or the jobs report is released or Apple/Microsoft earnings are out — well, there is no longer an unknown, and implied volatility falls.

Bonds Need to Be Watched

All that said, we will look closely at bonds, which are rallying this morning, with yields pushing down towards the 4.15% floor level. If that breaks, look for markets to rip higher, especially small caps, which have been on a stunning run in July.

Friday's session was a huge positive and volatility fell, but a followthrough day here on Monday will give us important information about this current rally and how it may take shape.

McDonalds Fails to Impress

The big fast food restaurant MCD had a triple miss of profit, revenue and comparable sales. Global comp sales decreased by 1%, reflecting negative sales across all segments. The company said that customers are making "fewer burger runs." We sold McDonalds in TheStreet Pro portfolio back in April, citing concerns about what lies ahead for the company. Our fears were confirmed this morning.

Earnings Later Today

Look for earnings tonight from Sprouts Farmers Markets SFM, F5 Networks FFIV, Welltower WELL and Rambus RMBS. The bulk of interest in tech earnings will be later in the week.

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At the time of publication, TheStreet Pro Portfolio had no positions in any securities mentioned.