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While you were sleeping: Volatility eases, Snap jumps

Thursday 8th February 2018

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Wall Street was mixed amid easing volatility as investors opted to focus on bets that the US economy will remain robust, underpinning growth in corporate profits.

In 1.51pm trading in New York, the Dow Jones Industrial Average gained 0.5 percent. However, the Nasdaq Composite Index declined 0.3 percent. In 1.36pm trading, the Standard & Poor’s 500 Index rose 0.2 percent.

Wall Street’s fear gauge—the CBOE Volatility Index or the VIX—sank 14.6 percent to 25.61 after earlier in the session falling as low 21.17 and rising as high as 31.64.

“Even a little bit of volatility is fine as long as we don’t start suddenly taking bigger swings,” Peter Jankovskis, co-chief investment officer of Oakbrook Investments, told Bloomberg. “The key thing to me is that the wave is dampening relative to where we were a couple days ago. It obviously takes a while for everybody’s nerves to calm down at once, but we’re moving in the right direction.”

The Dow moved higher as gains in shares of Boeing and those of Walmart, recently up 2.5 percent and 2.2 percent respectively, outweighed declines in shares of Apple and those of Microsoft, recently down 1.2 percent and 1.1 percent respectively.

“What we’re seeing is an attempt at stabilisation in US equity prices following a very sharp selloff,” Peter Kenny, senior market strategist at Global Markets Advisory Group in New York, told Reuters.

“The very sharp rise in volatility that accompanied it has also settled back and the bottom line is that the economy remains very robust and corporate earnings are expected to grow. So we have a constructive landscape,” according to Kenny. 

US Treasuries fell, pushing yields on the 10-year note two basis points higher to 2.82 percent.

Concerns that the Federal Reserve might raise interest rates more than previously thought drove the recent sell-off and increase in volatility on equity markets.

On Tuesday, Chicago Fed President Charles Evans pointed to the possibility of four rate hikes this year, if needed. 

“With the data I see today, my policy strategy would be to keep policy on hold until midyear or so in order to assess the incoming inflation data,” Evans said in prepared remarks for a speech in Des Moines, Iowa. “If we get to that point and have more confidence that inflation is moving up sustainably, then further rate increases would be warranted.”

“In contrast, suppose inflation picks up more assuredly, as many expect,” Evans said. “Then we still could easily raise rates another three or even four times in 2018 if that were necessary.”

Shares of Snap soared, trading more than 35 percent stronger as of 1.16pm in New York, after the owner of Snapchat posted a jump in revenue and user growth that exceeded expectations. 

"It’s been a roller coaster mismatch between expectations and reality, but the benefits of all their initiatives are finally starting to come to fruition,” James Cakmak, an analyst at Monness Crespi Hardt & Co, told Bloomberg. 

In Europe, the Stoxx 600 Index finished the day with a 2 percent rally from the previous close. Germany’s DAX Index rose 1.6 percent, France’s CAC40 Index advanced 1.8 percent, while the UK’s FTSE 100 index climbed 1.9 percent.


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