Fear index soars as Wall Street sees major declines
2:24 PM EDT, August 5, 2024
The volatility index, often referred to as the fear index, recorded the largest intraday increase on Monday. It rose to 65.73, or about 42 points compared to Friday's close, Reuters reports.
The fear index, officially known as the Volatility Index (VIX), measures the volatility expected by investors in the S&P 500 over the next thirty days. It typically rises during periods of turbulence and stabilizes during times of political and economic calm.
Since its inception in 1993, higher levels of the VIX have usually coincided with declines in the S&P 500.
"Values of 57 and higher have only been seen during the great financial crisis and the COVID-19 pandemic," notes analyst Daniel Kostecki.
"It looks like a liquidity crisis, which is very unusual," said Joe Tigay, portfolio manager of the Rational Equity Armor Fund, as quoted by Reuters.
On Friday, the yield on 10-year U.S. Treasury bonds fell to its lowest level since December, reaching 3.82%, reflecting a flight to safer assets by investors.
Declines on Wall Street
Main indices on Wall Street recorded declines during the Monday session opening. The Dow Jones index fell by 1.71%, the Nasdaq by 6.34%, and the S&P 500 by 3.66%.
The Dow Jones Industrial Average decreased by 681.07 points, or 1.71%, to 39,056.19 points at the Monday opening. The S&P 500 opened lower by 195.42 points, or 3.66%, to 5,151.14 points. Meanwhile, the Nasdaq Composite fell by 1,063.63 points, or 6.34%, to 15,712.53 points.
Yields on 10-year Treasuries are strengthening by about 0.05%, reaching 3.74%. The yield on U.S. two-year bonds is down by 0.06% to 3.81%.
