So much for Monday’s oil rally. This morning, a day after Russia and Saudi Arabia succeeded in talking up oil prices with promises that OPEC and allied non-OPEC producers would extend the current production cuts past their June expiration until the end of 2017, U.S. benchmark West Texas Intermediate is down 0.8% to $46.06 a barrel and international benchmark Brent crude is off 0.81% to $48.94 a barrel as of noon in New York
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?
Last night President Donald Trump backed off his demand that any deal to fund the federal government include money to start construction on The Wall. At an event with conservative journalists, Trump said he’s okay waiting until September to have this fight. Which would seem to indicate that the President would sign a funding bill that doesn’t include money for The Wall.
It’s a classic risk off market today as of 4 p.m. New York time. All the safe havens are up. The yen is ahead 1.2% to 109.65 to the dollar, breaching the 110 level for the first time since November. Gold is 1.73% higher to $1275.60 an ounce. The 10-year U.S. Treasury is up and the yield is down to 2.30%. And riskier asset classes are down. Modestly.
Nothing happened to the VIX, the CBOE S&P 500 Volatility Index, at the close yesterday. What is sometimes called the “fear index” since it measures demand for hedges against a move in the Standard & Poor’s 500 stock index, closed at 12.38. That was just 0.08% higher on the day. Something big happened to the VIX, intraday.
