Hold on for a Bumpy Ride

GOOD MORNING. stocks in Asia closed mixed today; U.S. futures are pointing to a higher open.

The stock market’s monthly winning streak ended on Friday as the S&P 500 shed 2.8% and the markets posted their first monthly loss since March. And traders can expect a volatile, choppy week ahead. A slew of economic reports are due out over the next few days, including manufacturing and pending home sales today; factory orders and auto sales tomorrow; and a jobs report on Friday. The Fed will also weigh in on the economy and interest rates with a policy announcement on Wednesday. Most economists expect the Fed to leave interest rates unchanged. But with economic growth finally returning in the third quarter, some observers say the Fed may now hint at future rate increases.

Traders are certainly bracing for a rough week. The VIX volatility index—the market’s “fear index”—spiked 24% on Friday to 30.6, its biggest gain since October 22, 2008. That means the markets are expecting tough goings ahead. One bit of news likely to weigh on the markets: the bankruptcy filing of CITGroup (CIT).One of the nation’s largest lenders to small and midsize businesses, with over $70 billion in assets, CIT filed for Chapter 11 bankruptcy protection yesterday after a wave of government and private bailout efforts failed to stabilize the firm. Though the filing was widely expected it marks a black eye for the government’s Troubled Asset Relief Program, which pumped $2.3 billion into CIT and is likely to lose most of the investment (a point the Treasury department has acknowledged). CIT intends to reorganize and start lending again next year. But the filing could rattle business confidence.

Still, some Wall Street firms are encouraging traders to look beyond the short-term blips. J.P. Morgan told clients last week that surveys point to a “significant improvement” in business and consumer sentiment. Corporate revenues rose sharply in the third quarter and global surveys indicate that companies are “turning away from retrenchment.” No one is promising smooth sailing, of course, but the economic outlook may not be as bad as traders think.

IN OTHER NEWS:

Investors will get another look at the health of the rental-car industry when Avis Budget Group (CAR) reports its earnings after the market closes today. Analysts are expecting earnings of 55 cents a share, flat from the same quarter a year ago, but an improvement over last quarter.

If Avis’s results are a little lackluster, it’ll be in good company. Competitors Hertz (HTZ) and Dollar Thrifty Automotive Group (DTG) have both reported revenue below last year’s, although cost cuts helped results come in better than expected.

The rental car sector has suffered as businesses have cut back sharply on travel spending, and competition between these rivals has become increasingly fierce. Investors will likely be listening for any comments from management about stabilization in demand during the company’s conference call with investors at 9 a.m. tomorrow.

As demand rebounds, the question for Avis – as for other car-rental companies – will be how much discounting they will have to do to win market share, says Henry Harteveldt, a travel industry analyst at Forrester Research. Customers will readily switch to a different rental company if they can get a better price, Harteveldt says. “You can get share, but can you get share in a way where you can make a profit?” he says.