VIX Makes Generational Low on Jobs data
Today's financial recap and tomorrow's financial outlook.
The Bureau of Labor Statistics said nonfarm payrolls rose by 217,000 in May, which was slightly ahead of the 215,000 consensus. It was the fourth straight month with a 200,000+ increase, the longest such streak since 2000.
Unemployment fell to a 6-year low at 6.3%, while hourly earnings rose 2.1% year-over-year, slightly exceeding expectations for a 2.0% gain.
In reaction, the S&P 500 (INDEXSP:.INX) rallied and finished at an all-time high of 1,949.44, up 0.5%.
The VIX (INDEXCBOE:VIX) fell 8.1% to 10.73, a level not seen since early 2007.
Related volatility indicators, like the CBOE Short-Term Volatility Index (INDEXCBOE:VXST) and the CBOE NASDAQ-100 Volatility Index (INDEXCBOE:VXN), also declined.
Conventional wisdom assumes that extremely low VIX levels means investors are very complacent. This is bearish from a sentiment standpoint, meaning stocks could fall and the VIX could rise.
However, the reality is not so simple, since 10-day realized volatility in the S&P 500 is just 4.1%.
Since the VIX, which measures implied volatility in S&P 500 index options, is trading at a premium to realized volatility, investors may not be as complacent as the VIX would otherwise suggest.
In a surprise move, Mexico's Central Bank cut its main policy rate by 50 basis points, to 3.0%, to combat weak economic trends. Both Bloomberg and Reuters reported that zero economists in their respective surveys expected this move.
Taking a deeper look at stocks, the small-cap Russell 2000 (INDEXRUSSELL:RUT) rose an impressive 1.0%, indicating improved optimism for the US economy.
Emerging markets also fared well, with Brazil, Russia and India, leading the charge, though China was weak.
European stocks also performed well, spurred on by the ECB's aggressive monetary policy announcement from Thursday.
GW Pharmaceuticals (NASDAQ:GWPH) surged 6.2% after the FDA granted Fast Track designation to its Epidiolex drug, which treats a rare form of epilepsy.
And finally, shares of Apple (NASDAQ:AAPL) were down fractionally ahead of its 7:1 split, which went into effect after the close.
Monday's Financial Outlook
There are no major economic reports scheduled for Monday. Hertz Global (NYSE:HTZ) is the only major name reporting earnings.
Overseas, over the weekend and into Monday, we'll see China's Trade Balance numbers, and Japan's Q1 GDP and May consumer confidence reports.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter