Stock Markets’ Fear Gauge Is Rising as Stocks Dip
On Tuesday, the stock market fear gauge increased as the tech stocks led the way on a falling market.
The S&P 500 fell 0.7%, with the Dow Jones falling 0.2%- a drop of 57 points. The Nasdaq Composite was down even more, dipping 1.1%.
The fear gauge is the name for the CBOE Volatility Index, also called the Vix. It measures stocks trading below what is perceived to be their intrinsic value. If traders are selling stocks in large numbers when the market dips but could be due for a rebound soon, the fear gauge flashes. It did that Tuesday, and the Vix increased 9.6%, which brought it up to 15.61.
The Vix helps traders anticipate the expected volatility of the market, and as it increases, the market is likely to become less predictable. The idea is that fear drives traders to make rash, possibly unwise decisions instead of waiting for an upward trend to sell their stocks at a profit. When the fear index is high, stocks are often traded at a loss, and that can mean there is little confidence in the market and its ability to recover soon.
Stocks Worth Watching
Expect a rally from Nvidia, as earnings reports are expected on Wednesday. The AI chip market has had an excellent month (up 19%) but a low week, losing 8% over the last seven days. Nvidia is meeting the demand for AI components in a growing market and is expected to post positive earnings.
Even with the fear index up and all the market indexes down, the overall market is high and is not expected to lose its gains anytime soon. Tech stocks are doing particularly well.
Amazon’s stock is down today by 1.43%, but this is a high performing stock overall and is soon to be added to the Dow Jones Industrial average. Though the company hardly needs any further exposure after a reported $30.4 billion in net income for 2023, the new addition to the Dow Jones demonstrates its continued relevance.
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