|Day's range||12.25 - 13.02|
|52-week range||8.56 - 50.30|
Cboe is making changes to a monthly auction that determines final prices of futures tied to the VIX. Because the VIX tends to rise when stocks fall, and vice versa, its derivatives are popular among traders to hedge portfolios or bet on the future direction of market volatility. Fears of regulatory scrutiny have swept trading desks as lawsuits emerged over Cboe’s marquee VIX products.
After gaining for three consecutive trading weeks, the S&P 500 opened this week on a weaker note by closing lower on Monday. On June 18, the S&P 500 opened the day lower and traded with weak market sentiment. Eight out of 11 major S&P 500 sectors closed the day lower on Monday. The weakness in the telecom services, consumer staples, and healthcare sectors weighed on the market. However, strength in the energy and utilities sectors limited the market losses. Market sentiment
Pray for the global economy. For much of the past year or so, investors and economists have anxiously watched the relentless shrinkage of the gap between short- and long-term U.S. bond yields to the narrowest levels since 2007. Within the past two months, the yield on an ICE Bank of America index of government bonds due in seven to 10 years has fallen below the yield on an index of bonds due in one to three years for the first time since the first half of 2007.
US equity markets (VOO) remained largely unchanged in an eventful week that ended on June 15. Trade war uncertainty, geopolitics, and monetary policy decisions failed to dent investor confidence. The three central bank meetings solidified the divergent monetary policy narrative as the Fed remained hawkish. The European and Japanese central banks are likely to continue with the accommodative policy for the time being. The announcement of tariffs on Chinese imports reignited investor worries, but the impact was minimal.
Stock-market investors navigated, virtually unscathed, a gauntlet of central-bank gatherings, a historic summit between President Donald Trump and North Korean Kim Jong Un, and flaring trade tensions. The S&P 500 index(^GSPC)ended the week essentially flat, managing the narrowest of weekly gains, up 0.02% to 2,779.66, while the Dow Jones Industrial Average(^DJI)posted a weekly decline of 0.9%. The Nasdaq Composite Index(^IXIC)outperformed both, rising 1.3% for the five-day period.
After gaining in the first two trading days of the week, the S&P 500 pulled back on Wednesday. Following the pullback, the S&P 500 opened higher on June 14 and closed the day with limited gains. On Thursday, seven out of 11 major S&P 500 sectors closed the day higher. Strength in the utilities, consumer discretionary, and telecom services sectors supported the market. However, weakness in the financials and industrials sectors limited the market gains.
Rising real interest rates haven’t yet made for a sustained pickup in Treasury volatility, leaving some investors to ask what it would take to spark some turbulence. Danielle DiMartino Booth of Quill Intelligence said the European Central Bank, and not the Federal Reserve, holds the key as it looks to set a timetable for winding down its ultra-accommodative policies. With the Federal Reserve’s shrinking balance sheet unable to offset easy global financial conditions on its own, investors should closely watch the ECB at Thursday’s meeting where the central bank is expected to discuss the end of quantitative easing, though the actual wind-down almost certainly remains several months away at the earliest.
About 80% of S&P 500 Index companies reported first-quarter earnings that exceeded analysts’ estimates. The trigger was a return of implied volatility, as the CBOE Volatility Index (^VIX) briefly surged to 37 in February after averaging 11 in the previous 12 months. While the S&P 500 (^GSPC) rose or fell by more than 1 percentage point only eight times in 2017, already this year it has swung by that magnitude on 35 days.
The outcome of Trump-Kim talks could either help Chinese stocks or hurt European equities, CNBC finds using analytics tool Kensho.
Stock market sentiment is picking up once again, suggesting growing optimism but also heightened complacency. Among individual investors, 39% are bullish, the highest reading since February, in a weekly survey conducted by the American Association of Individual Investors. Signs of a pick-up in stock market sentiment suggest that calmer markets are luring investors back in, as The Wall Street Journal's Morning MoneyBeat newsletter noted on Friday.
Speculators are once again betting the stock market’s return to low volatility will persist despite the array of uncertainties it faces. Unlike last year, however, when amateurs piled into complex and risky exchange-traded funds that moved inversely to the VIX—the Cboe Volatility Index on options on the S&P 500—it’s professionals who have ramped up their short positions in VIX futures and options contracts his time. David Rosenberg, Gluskin Sheff’s lynx-eyed chief economist and strategist, points out speculative shorts in the VIX nearly doubled last week, to 44,380 futures and options contracts, from 25,556 the previous week, according to the most recent data from the Commodity Futures Trading Commission.
One of Wall Street’s most popular indicators of market fear tumbled to its lowest level since late January as the Nasdaq Composite Index recorded a second record close in as many sessions, suggesting that the appetite for risk, perhaps alongside investor complacency, is re-emerging in the stock market. The Cboe Volatility Index VIX(^VIX), which measures expectations for volatility in the S&P 500 (^GSPC) over the coming 30 days, fell 2.7% to 12.40 on Tuesday, marking its lowest finish since it hit 11.08 on Jan. 26, contributing to the so-called fear gauge’s nearly 20% retreat thus far in June, according to FactSet data. The VIX has shed 8% in the first full week of the early month and has given up 34% over the past three months, though it is still up 12.3% year to date.
Hedge funds hold the most number of short positions on the Cboe Volatility Index since late January -- before the record spike in the gauge that wiped out over $5 trillion in global stocks and jolted investors from their complacent slumber. Meanwhile, money managers are back to selling products linked to equity price swings en masse, either to speculate conditions will remain subdued or hedge underlying exposures. “Combined with a more benign view on the cycle than us, some argue that this is still a time to be selling volatility,” Morgan Stanley cross-asset strategists wrote in a Monday note.
Wall Street gurus found all kinds of “reasons”: a political mini-crisis in Italy, President Trump’s slapping tariffs on some of our closest trading partners, and a grand slam of a jobs report that showed unemployment at 3.8%, an 18-year low. Investors are trying to gauge how much of the positive news already is priced into stocks and how much of the unpredictable they can actually quantify. The S&P has averaged 53 trading days of 1% moves or more annually since 1958, according to Jessica Rabe of DataTrek Research.
Traders leery of sharp declines after a wild few months in the U.S. equity markets could spring for stock hedges through options. As major U.S. stock indexes continued to rally, individual investors and institutional investors jumped in to ride the surge higher without any hedges. Because many compare their returns to stock indexes like the S&P 500, allocating money toward hedges that don't pay out makes them underperform in the short term.
In particular, the continuing threat of restrictions on imports from a wide range of trade partners will provoke retaliation affecting U.S. consumers, financial markets and activities of multinational companies. Investors should watch for the resulting volatility to discourage investments in equities and prompt demand for high-grade debt. Market volatility this week has been driven largely by developments in Italian -- and to a lesser extent, Spanish -- politics. The CBOE Volatility Index, or VIX (also known as the “fear index”), surged by the most since March on Tuesday on the prospect of fresh elections as the country’s President and the populist coalition hoping to form the next government disagreed on the new Finance Minister.
The cryptocurrency market has rebounded in the last few days after steep declines last week. The total market cap was at $331 billion at the time of writing, compared to $323 billion on Tuesday.
Price changes in bitcoin and other cryptocurrencies are a better indicator of volatility in the market — as good as the VIX, says Brian Stutland of Equity Armor Investments. "There is huge correlation right now between VIX and bitcoin 30 days ago," he says. Cryptocurrencies allow investors to move their money off the balance sheets of banks and decrease credit risks.
After a bout of relative calm this month, volatility returned to Wall Street Tuesday as stocks tumbled. The Cboe Volatility Index (^VIX), or VIX, which measures expectations for volatility in the S&P 500 (^GSPC) over the coming 30 days, jumped by 38% to above 18 on Tuesday to hit the highest level in more than two months, as investors fled equity markets in favor of government bonds. The S&P 500 dropped 43 points, or 1.6%, to 2,677, its largest one-day decline since April 6, while the Dow Jones Industrial Average (^DJI) remained down more than 400 points.
Boom times have returned on Wall Street, at least for one trading desk. Goldman Sachs made $200 million in profit on a single day this February as calm in stock markets was shattered with a historic surge in volatility, according to people with knowledge of the move. The investment bank had positioned itself to benefit if the Cboe Volatility Index , the product sometimes called the "fear index" because it reflects expectations of future volatility, climbed, said the people, who declined to be identified speaking about internal matters.