VIX Rises 8%, Treasury Yields Jump, Dow Plunges: Why Is Wall Street Wobbling Wednesday? (CORRECTED)

Editor’s note: This story has been updated to correct an error in today’s date.

It’s been a rocky start to Wednesday on Wall Street, with major U.S. equity indices and the eleven S&P 500’s sectors all trading in the red. Volatility spiked amid rising investor anxiety over interest rates.

Yields on longer-dated Treasury bonds witnessed a further rise following Tuesday’s increases, as risks of a higher-for-longer interest rate scenario continue to escalate.

The yield on the 30-year Treasury surged to 4.72%, up nearly 15 basis points this week, leading to a decline in fixed-income assets. The iShares 20+ Year Treasury Bond ETF TLT fell 0.9%, after tanking 1.4% on Wednesday.

The CBOE Volatility Index (VIX), often termed the market’s fear gauge, skyrocketed 8% as of 10:30 a.m. in New York.

Similarly, the Merrill Lynch Option Volatility Estimate (MOVE) – the bond market’s equivalent to the VIX – increased by 7%.

The U.S. Dollar Index (DXY), as tracked by the Invesco DB USD Index Bullish Fund ETF UUP, rose 0.3%.

Chart: 30-Year Treasury Yields Jump On Higher-For-Longer Rate Scenario

Traders Trime Fed Rate Cut Expectations

Traders are currently factoring in only 33 basis points of Federal Reserve rate cuts by the end of the year, indicating that only one rate cut is fully priced in.

Looking ahead to the end of Q1 2025, traders are pricing in 52 basis points of cuts, implying two rate cuts within a year.

On Friday, the Bureau of Economic Analysis will release the highly awaited Personal Consumption Expenditure (PCE) price index report for April, the Fed’s preferred inflation gauge.

Economists expect a marginal decline in both the headline index, from 2.7% to 2.6% year-on-year, and in the core index, from 2.8% to 2.7%.

Equity Indices Reactions

• The S&P 500 Index, as tracked by the SPDR S&P 500 ETF Trust SPY, was 0.6% lower.
• The Nasdaq 100 Index, as monitored through the Invesco QQQ Trust QQQ, inched 0.5% down.
• The Dow Jones, tracked by the SPDR Dow Jones Industrial Average DIA, fell 0.8%. The blue-chip gauge is eyeing the fourth red day out of the last five.
• Small caps, as tracked by the iShares Russell 2000 ETF IWM, sunk 1.3%.

S&P 500 Major Movers

• American Airlines Group Inc. AAL: Dropped over 14%, marking its worst performance in four years, following analyst downgrades by Jefferies and Seaport Global.
• Marathon Oil Corp. MRO: Rose nearly 10% in response to an all-stock acquisition deal of $22.5 billion by ConocoPhillips COP.
• Moderna Inc. MRNA: Fell 7%, continuing its decline after an 8% drop on Tuesday.
• Molina Healthcare Inc. MOH: Dropped 7.5%, on track for its largest fall since September 2020.

Read now: ConocoPhillips To Acquire Marathon Oil In All-Stock Deal At 14.7% Premium: Details

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