A study showing a slight uptick in consumer confidence was released Tuesday morning. The marketplaces advanced. The markets went into reverse a short time later once the Fed released minutes from its latest meeting. The marketplaces rose again on Wednesday, this time on information showing development in American and Chinese manufacturing output. By Friday, most are counting on one more stock plunge once the August jobs report is released by the Labor Department. 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 throughout the month for its biggest August jump since 2001.
How fear activates unpredictability
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. On Wednesday, the VIX rose 4.8 percent to 28.77. MarketWatch reports that because the VIX rises when stocks come “unglued,” traders use it as a measure of concern 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, however the Wall Street Journal said that it is not close to a level associated with panic mode. Genuine concern was evident in 2008 once the fear index went past 80 after Lehman Brothers imploded.The market’s “flash crash” in May generated global jitters. The fear index passed 80 at the time.
Markets not behaving typically
When minutes from the last Federal Reserve meeting were released, they revealed that the Fed was uncertain about the United States economic outlook and what to do over it. U.S. blue-chip stocks responded in kind, falling to put the finishing touch on the worst August for stocks since 2001. Yet stocks resumed climbing Wednesday, the Associated Press reports. Reports showing robust gains in United States and Chinese manufacturing amazed every person and generated optimism about financial recovery worldwide. By sending stocks downward via August, traders were betting that weak United States of America financial growth will dent corporate earnings. But since many large corporations rely heavily on business overseas, they could benefit from expectations that foreign economies will expand.
Markets a step ahead of the experts
The market’s sudden turnaround Wednesday after finishing out a dismal August the day before left analysts flat-footed, according to the New York Times. Expectations were that with Labor Day imminent, the markets would be coasting, said Stephen J. Carl, head equity trader at the Williams Capital Group in the Times article. The manufacturing index, a key metric offered to traders by the Institute of Supply Management, rose astonishingly in August to 56.3 after coming in at 55.5 in July. A less extraordinary figure of 53. was predicted by Thomson Reuters in its survey of economists. The impact of those numbers confounded Carl. He told the Times he was “perplexed” that manufacturing directory of 56.3 would be bumping stocks. But reality may be setting in again soon enough. The latest unemployment figures come out Friday. Traders expect a rough ride. The Labor Department jobs report is expected to show the loss of an additional 100,000 jobs. Unemployment, aft! er holding steady at 9.5 percent through the summer, is predicted to jump to 9.6 percent. Traders are looking for the VIX to rise along with it.
Find more details 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
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