‘Fear gauge’ hits low as stocks up this week
Stocks barely budged in a holiday-shortened session while Treasuries fell, with this month’s rally in global bonds showing signs of stalling.
The S&P 500 closed little changed at 1 p.m. in New York, while notching its fourth straight week of gains. Wall Street’s “fear gauge” - the VIX dropped to 12.46, the lowest since January 2020. Cryptocurrency-linked shares rallied as Bitcoin rebounded. Nvidia Corp. slid on a news report the company has told customers in China it’s delaying the launch of an artificial-intelligence chip. Ten-year US yields approached 4.5%.
Investors flocked into equities at the fastest pace in almost two years, according to Bank of America Corp.’s Michael Hartnett, as wagers of peak interest rates grow.
Global stock funds have seen inflows of about $40 billion in the two weeks through Nov. 21, Hartnett wrote in a note, citing EPFR data. Still, cash funds remain the winner with additions of nearly $1.2 trillion so far in 2023, compared with $143 billion into equities, while bond funds broadly registered outflows.
“We had a nice bounce off of an oversold condition at a seasonally appropriate time,” said Steve Sosnick at Interactive Brokers. “It was predicated on the Fed ending its hiking cycle, so that’s OK. But it now seems predicated on a rapid easing cycle, which may require a much worse economy than investors expect.”
In economic news, employment declined at US service providers and manufacturers in November for the first time since mid-2020 amid tepid demand and elevated costs, a survey from S&P Global showed.
Treasuries followed a slide in European bonds that was caused by concerns of burgeoning supply. Germany will suspend a constitutional limit on net new borrowing for a fourth consecutive year after Chancellor Olaf Scholz’s government was forced into a radical budget overhaul by a ruling last week from the nation’s top court.
“In this early close Black Friday, we open to much higher Treasury yields because of what happened yesterday in Germany,” said Andrew Brenner at NatAlliance Securities. “A court ruling is causing Germany to suspend their debt ceiling, which has led 10-year German Bunds to rise. Other European rates followed, and so have US Treasuries.”