The stock market forged ahead Tuesday early morning on news that the consumer confidence index rose. Then the minutes from the latest Fed meeting were made public and also the marketplaces slid back into negative territory. Wednesday marketplaces shot up again on news of gains in U.S. and Chinese manufacturing. Chances are the stock exchange will dive again on Friday when the Department of Labor submits its monthly jobs report. The rollercoaster ride brought a fitting end to the worst August for the stock market since 2001. The Market Volatility Index, also known as the VIX, or “fear index,” jumped nearly 11 percent through the month for its biggest August jump since 2001.
The way the marketplace measures fear
At the closing bell Monday, the VIX was documented at 27.21. It fell Tuesday. When the markets closed it had dropped 4.2 percent to 24.55. It rebounded 4.8 percent Wednesday to 28.77. MarketWatch reports that as the VIX rises when stocks come “unglued,” traders use it as a measure of fear among investors. The so-called fear index, which can be subject to wild, acute fluctuations, inched higher through August as the Standard and Poor’s 500 lost 4.7 percent. The VIX is vibrating, but the Wall Street Journal said that it’s not close to a level associated with panic mode. Within the aftermath of the Lehman Brothers meltdown in 2008, the worry index exceeded 80.It spiked higher than 40 throughout the stock market “flash crash” in May.
The market industry is at odds with the self
Traders were eager to look at the minutes from the most recent Fed governors meeting. They painted a picture of uncertain economists unsure about where the economy is heading and the way to fix it. U.S. blue-chip stocks responded in kind, falling to put the finishing touch on the worst August for stocks since 2001. Optimism returned the next morning, the Associated Press reports, as reports of unexpected growth in United States and Chinese manufacturing sent stocks upward. Traders drove the markets down through August by betting that an economy losing steam would in turn do the exact same for corporate earnings. But since numerous big companies rely intensely on business overseas, they could benefit from expectations that foreign economies will increase.
Nobody is immune to the confusion
After the market’s August swoon, The NY Times reports that Wednesday’s rebound caught professionals off-guard. Expectations were that with Labor Day imminent, the markets would be coasting, said Stephen J. Carl, head equity trader at the Williams Capital Group within the Times article. An Institute for Supply Management report that is a crucial economic indicator for American traders showed its manufacturing index unexpectedly increasing to 56.3 in August from 55.5 in July. Economists polled by Thomson Reuters had forecast a weaker reading of 53.. The impact of those numbers confounded Carl. He told the Times he was “perplexed” that manufacturing index of 56.3 would be bumping stocks. However, they way things have been going, more predictable market behavior could return soon. Traders are bracing themselves for Friday’s report on unemployment. The Labor Department jobs report is expected to show the loss of another 100,000 jobs. Joblessness is expected to get worse. Some predict the rate will spike to 9.6 percent. The VIX is expected to respond in kind.
Discover more information on this subject
MarketWatch
marketwatch.com/story/vix-notches-biggest-august-rise-in-over-a-decade-2010-08-31?dist=afterbell
Wall Street Journal
online.wsj.com/article/BT-CO-20100825-709386.html
Associated Press
google.com/hostednews/ap/article/ALeqM5jmT59dgLTTziX4p9X9MRBRpWZGdQD9HV60602
New York Times
nytimes.com/2010/09/02/business/02markets.html?partner=rss and emc=rss
