A slight increase in the consumer confidence directory triggered a surge within the stock market Tuesday morning. A few hours later, when the Federal Reserve’s minutes were released, the stock marketplace dove. Wednesday marketplaces shot up again on news of gains in U.S. and Chinese manufacturing. It’s likely that the stock market 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 exchange since 2001. The year 2001 was also the last time the Industry Volatility Directory, abbreviated as VIX and also called the “fear index,” experienced such a large jump in the month of August, when it rose by almost 11 percent. Post resource – Stock market volatility: fearful over reactions to economic data by Newystype.com.
Current market volatility and the worry catalog
When the markets closed Monday the VIX was at 27.21. It fell 4.3 percent on Tuesday to 24.55. The VIX made up the loss on Wednesday, moving to 28.77-a 4.8 percent rise. As reported in MarketWatch, traders equate the VIX with investor anxiety. The index rises along with market chaos. Throughout August the aptly-named worry directory rose steadily as the marketplaces fell. The VIX is up one day and down the next. However, the Wall Street Journal reports that it will have to shoot much higher to cause widespread panic. Genuine concern was evident in 2008 once the worry 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.
Industry blows in the breeze
Traders were eager to take a 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 how to fix it. This lack of understanding scared the markets once more to bring a fitting end to the worst August for traders since 2001. The Associated Press reported that stocks were surging Wednesday after surprising reports of strong growth in United States of America and Chinese manufacturing calmed concerns about the global financial recovery. By sending stocks downward via August, traders were betting that weak U.S. financial growth will dent corporate earnings. However, as a result of the truth that a great deal of large corporations count on a major portion of their business volume internationally, the expansion of foreign economies could positively impact their bottom lines.
No one is immune to the confusion
After the market’s August swoon, The NY Times reports that Wednesday’s rebound caught specialists off-guard. Stephen J. Carl, an equity trader on Wall Street, told the Times that he was taking for given that the pre-Labor Day week would be uneventful. 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 lesser score was forecasted by economists responding to a Thomson Reuters poll-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. Yet data on the horizon portends a reality check. The latest joblessness 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 is expected to get worse. Some predict the rate will spike to 9.6 percent. The VIX is! expected to respond in kind.
Additional reading
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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