As the nation reopens in phases, Wall Street’s "fear gauge" surged Thursday (June 11) as fears of a second economic shutdown in the face of more coronavirus outbreaks fueled market anxiety, Reuters reported.
The Cboe Volatility Index (VIX), a gauge of the market's volatility for the next 30 days, reached its highest level in more than a month as concerns over a resurgence of COVID-19 caused U.S. stocks to fall.
VIX rose to 40.8, its highest closing level since April 23. The index had its biggest daily point improvement since March 16, in the midst of a plunge that signaled the end of the nearly 11-year bull run in the U.S. stock market, the news service reported.
The S&P 500 ended 5.9 percent lower on Thursday.
Some investors said they believed the pullback was overdue — considering the widespread view that the nation will have a slow recovery from the COVID-19 recession.
“We’ve been cautious on equities for a while now,” Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments, told the news service. “By no means is the virus threat over, on top of the fact that we are not going to recover quickly.”
The latest fear data come as the number of U.S. coronavirus infections surpassed 2 million with more than 112,000 American deaths, according to Johns Hopkins University's Coronavirus Resource Center. The seven-day average of new cases over the last two weeks is still rising in more than 20 states, fueling fears about a second wave of the epidemic just as business activity is resuming.
Despite a run-up in stocks in early June, expectations for volatility had remained high.
Don Dale, chief risk strategist at Equity Risk Control Group, told Reuters that investors hedging their bets, along with speculative buying, had likely contributed to the rise in the VIX that had occurred even before stocks fell later last week.
Kristina Hooper, chief global market strategist for the Atlanta-based Investco, told MarketWatch that the stock market has almost had blinders on.
“More than one in three companies in the S&P 500 are dispensing with earnings guidance,” she said. “So investors have anchored to data — which has been relatively positive about reopenings in various states, improvements in PMIs, and the jobs report last week.”
The big picture, as reported by PYMNTS, is that there will be a huge hit to the economy over the next 10 years. The Congressional Budget Office said that would mean an estimated $7.9 trillion reduction in the U.S. gross domestic product (GDP) over that time period.