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05/08/24
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Wall Street’s Fear Gauge Surges 50% As Investors Await Fed’s Next Move
On Monday, stock markets globally experienced a substantial blow amid increasing fears of a recession in the U.S., leading to debates among analysts and investors about whether the Fed would need to accelerate its rate cutting to bolster growth.
The latest turmoil in markets pushed the CBOE Volatility Index, also called the VIX index, about 50% higher to 35.16, the highest level since Oct. 2020.
Often called the “fear gauge,” VIX measures market expectations of short-term volatility as measured by S&P 500 index options. It mirrors investor anxiety and sentiment, and higher values indicate increased potential turmoil and market uncertainty. The index is generally used as a gauge of investor sentiment and market risk.
The sharp increase in the fear gauge comes amid a wide sell-off in equities triggered by Japan’s Nikkei dropping 12.4% to a 7-month low, marking a level of loss not seen since the financial crisis globally in 2011.
S&P 500 futures dipped 2% and Nasdaq 100 futures fell 3.3% while FTSE futures slid 2.4% and EUROSTOXX 50 futures dropped 2%.
The weak payrolls report for July led to markets pricing in a 78% chance that the Fed will not only ease rates in Sept. but also cut by a full 50 basis points.
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