Wall Street ‘fear gauge’ at 3-week high as stocks sink

New York: So, it looks like Wall Street is feeling a bit jittery lately. The Cboe Volatility Index, which is like a fear gauge for investors, just hit a three-week high. This happened after stocks took a dive following a surprisingly good jobs report.

The report showed that employers added 256,000 jobs in December, which was way more than what experts were expecting. Because of this, folks are starting to think that the Federal Reserve might not cut interest rates anytime soon. The VIX climbed up to 19.18, and at one point, it even reached 20.31, which is a sign that investors are getting a bit nervous.

When the VIX goes above 20, it usually means that people are scrambling for options to protect themselves from market drops. Michael Purves, the CEO of Tallbacken Capital Advisors, mentioned that volatility is on the rise, and that’s putting pressure on the stock market, which is already looking a bit pricey.

Also, longer-term U.S. Treasury yields are hitting their highest levels since last November. This is partly because of worries about the new administration’s policies and how they might affect the fiscal deficit and inflation. Traders are reacting by buying up defensive options contracts, with VIX call options seeing a lot of action.

In fact, on Friday alone, about 400,000 VIX call options were traded, which is way more than usual. Mark Hackett, a Chief Market Strategist, noted that the market is definitely leaning towards a risk-off approach, indicating a shift in how investors are behaving. It’s a bit of a wild ride out there!