While you were sleeping: Wall St recovers in volatile trading

Wednesday 7th February 2018

Wall Street rebounded, as investors found value following Monday’s global stock market rout, amid bets that the outlook remains positive for corporate profits.

In 1.18pm trading in New York, the Dow Jones Industrial Average rose 0.4 percent, while the Nasdaq Composite Index gained 0.6 percent. In 1.03pm trading, the Standard & Poor’s 500 Index fell 0.2 percent.

The Dow traded at 24,433.34 in early afternoon, recovering after sliding as low as 23,778.74 earlier in the day.

“Put your seatbelts on. It’s going to be a volatile ride for the next several trading sessions,” Chad Morganlander, portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey, told Reuters. “Fundamentals are moving forward in a positive way, which gives us confidence that in the long run you’ll continue to see higher highs within the markets.”

On Monday the Dow sank more than 1,100 points, its biggest drop in more than six years, which Federal Reserve Bank of St. Louis President James Bullard on Tuesday called “the most predicted selloff of all time.”

“This is the most predicted selloff of all time because the markets have been up so much and they have had so many days in a row without meaningful down days,’’ Bullard told reporters after a speech Tuesday in Lexington, Kentucky, Bloomberg reported. “So it is probably not surprising that something that has gone up 40 percent like the S&P tech sector would at some point have a selloff. Before there was a selloff, people said repeatedly some day this will sell off.”

Wall Street’s fear gauge—the CBOE Volatility Index or the VIX—dropped 8 percent to 34.33 after hitting a high of 50.30 earlier in the session and touching a low of 22.42.

Shares of Cboe Global Markets, which owns the intellectual property rights for the VIX, traded 10.4 percent lower at US$116.92 as of 1.31pm in New York. Earlier in the day the stock slumped as low as US$108.

Credit Suisse Group said it’s liquidating a note that uses VIX derivatives which can only be bought and sold on the Chicago-based exchange and have helped fuel its growth, Bloomberg reported.

The Dow gained as advances in shares of DowDuPont and those of Home Depot, recently up 3.2 percent and 2.4 percent respectively, outweighed declines in shares of Exxon Mobil and those of Travelers Cos, each recently down 2.6 percent.

“You continue to have investors re-rating stocks based on higher inflation and higher interest rate expectations,” Michael Arone, chief investment strategist at State Street Global Advisors in Boston, told Reuters.

US Treasuries dropped, sending yields on the 10-year note up 6 basis points to 2.77 percent.

Some pointed to the fact that volatility was contained to equities as a sign of optimism.

“The fact that you’re not seeing the volatility in the currency market, in the bond market, etc, is very reassuring,” Tony Roth, chief investment officer at Wilmington Trust Investment Advisors, told Bloomberg. “Since the credit crisis, the equity market is much more volatile. That’s where we seem to be seeing a lot of these institutional hedge-fund, program-trader type of investors playing.”

In Europe, the Stoxx 600 Index ended the session with a 2.4 percent slide from the previous close. Germany’s DAX Index dropped 2.3 percent, France’s CAC40 Index shed 2.4 percent, while the UK’s FTSE 100 index fell 2.6 percent.

(BusinessDesk)

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