By Samir El Khoury
The VIX Fear and Volatility Index, reflecting investors’ anticipated stock market price movements, increased from 11.81 points to around 15.40 points yesterday. This marks its highest level since November 10, 2023, suggesting heightened turmoil and investor unease in the US stock markets.
This noticeable increase is due to several factors, the most prominent of which are:
- Cautious statements by some Fed members, specifically by Christopher Waller, who confirmed that he saw no reason to reduce interest rates at a rapid pace, as happened in previous easing periods, and added that the easing process must be conducted systematically and carefully when the time becomes appropriate to engage in it.
- Core retail sales increased on a monthly basis in the United States of America yesterday, recording a growth of 0.4%, which is a percentage that exceeded expectations and the previous reading (0.2%), which prompts the Federal Reserve to maintain its tight monetary policy for a longer period, that is, to maintain high interest rates for a longer period of time.
- An increase in long-term and short-term US Treasury bond yields, as the two-year bond yield recorded 4.37%, and the ten-year bond yield recorded 4.13%, which is its highest level since December 13, 2023.
- The US Dollar Index, which measures the performance of the dollar against a basket of six major currencies, rose to 103.69 points yesterday, its highest level since December 13, 2023, putting pressure on the S&P 500 Index.
It is worth noting that the markets have reduced their bets on interest rate cuts in the United States of America, as they are currently pricing in a probability of about 60% for an interest rate cut in March 2024.
Regarding the technical aspect, according to Fibonacci, there is a possibility that the VIX will rise to levels of 16.14 points (38.20%), 17.48 (50%), and 18.83 (61.80%).
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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