I’d call the market mood “odd” right now. It’s maybe “hopeful fear.” Or maybe “fearful hope.” Nobody wants to move to the sidelines in case the rally is going to continue. Nobody wants to be too long just in case we’re looking at a pullback or correction. The focus of this uncertainty is the big technology stocks of the NASDAQ
It’s not much to hang a rally on, but the Treasury and stock markets moved up after Fed chair Janet Yellen told the House Financial Services Committee today that “the federal funds rate may not have to rise all that much further to get to a neutral policy stance.”
Yesterday’s rally in technology stocks and the NASDAQ Composite has disappeared this morning. At 12:30 New York time the NASDAQ was off 1.6%; the Technology Sector Select SPDR (XLK) was down 1.72%; and individual technology stocks were also in the red. Amazon (AMZN), for example, was lower by 1.58%; Nvidia (NVDA) was down 3.57%; Apple (AAPL) had retreated 1.58%; and Facebook had lost 1.16%.
The market is more anxious today but it doesn’t seem anywhere near panic country. The CBOE S&P 500 Volatility Index (VIX), was up another 10% today (10.75% as of 1:30 to be exact) on top of a greater than 10% gain on Friday, but that’s a relatively restrained move considering that what is known as the “fear” index has been trading near record lows and that this index can tack on moves of 30% to 40% in a day when investors get really fearful.
This morning it looks like the combination of turmoil in Washington and some weak economic data have led traders and investors to take money out of risk assets and put money into safe havens. The Standard & Poor’s 500 was off 1.11% and the NASDAQ Composite, which has led this market higher, was down 1.6%. The German DAX Index was off 1.3% and the French CAC 40 Index fell 1.69%.
This, Thursday, May 11, was one of those “half full” or “half empty” days. U.S. indexes finished the day largely unchanged. The Standard & Poor’s 500 index was off 0.22% to 2394.44. The NASDAQ Composite slid the same 0.22%. And the Russell 2000 small company index was off 0.66%. That the indexes finished the day roughly unchanged would have been a huge surprise to anyone who had only checked in during the morning hours.
On one level the U.S. stock market makes perfect sense. The Standard & Poor’s 500 stock index is up 6.64% for 2017 and as you’d expect volatility has tumbled with the CBOE S&P 500 Volatility Index down 22.72% for the year. But another volatility index the CBOE SKEW Index is up 7.5% for 2017. How can two volatility indexes be giving such different pictures of the level of fear, nervousness, and expected volatility in the S&P 500?
