Wall Street saw an unusually high level of activity in stock-options trading, with Tesla leading the way. The S&P 500, Dow, and STOXX 50 all rose, with the S&P 500 and STOXX 50 gaining 2.47% and 1.41%, respectively. Volatility indexes fell, the VIX and VSTOXX fell by 1.34 points and 1.39 points, respectively, while the VNKY dropped by 0.37 points. Recent economic data and earnings reports are providing the foundation for the rise in stock prices, and investor optimism.
The S&P 500 and STOXX 50 both fell by -0.66% and -0.74% respectively, with the VIX and VSTOXX rising by 1.50 points and 1.34 points to 19.85 and 18.68. The fall in stocks was attributed to recession worries after jobless-claims data and corporate earnings results, as well as retail and inflation data, and a hit to bank profits from a deal drought.
Interestingly, the Nikkei 225 rose by 1.66%, and VNKY fell by -1.04 points to 17.54, as Chinese economy experiences a near-historic slowdown in growth.
Weekly expected 50% confidence intervals are below
Wall Street was in a bullish mood this week, with the S&P 500, STOXX 50, and Nikkei 225 all rising by notable amounts. The S&P 500 rose by 2.67%, while the STOXX 50 rose by an even larger 3.31%. The Nikkei 225 was relatively subdued, rising by a still respectable 0.56%. The VIX and VSTOXX both fell, with the VIX dropping -2.78 points to 18.35 and the VSTOXX dropping -1.15 points to 17.34. Bank earnings, inflation data, comments from Powell, and a strong jobs report all contributed to the market's bullishness. Natural-gas prices in Europe have been in decline, providing a buffer against inflationary pressures in the region.
Expected market ranges for next week are below. As I wrote earlier you should not use normal distribution to calculate expected confidence intervals for market, but rather a fat-tailed distribution or empirical quantiles.
In general volatility indexes around the world fell, with the only two exceptions VNKY (Japan ) and VTA35 (Israel)
This week, the S&P 500 rose by 1.45%, the Dow Jones Industrial Average gained 700 points following the jobs report showing wage growth, and the STOXX 50 rose by 5.91%. In contrast, the Nikkei 225 fell by -0.46%, and the VNKY also fell by -0.99 points to 18.93.
Investors sought refuge in defensive stocks. Natural gas prices dealt a surprise reprieve to Europe, while the hopes of a less-hawkish Fed buoyed the gold outlook. Corporate insiders have not been betting on a market rebound.
Here are the 50% weekly confidence ranges calculated on fat-tailed distribution. That is at the end of next week, indexes will fall within the range 50% of the time.
Will be adding more global equity/volatility indexes next week.
The final trading week of 2022 saw stock markets finish the year with a slight downturn, with the S&P 500 falling by -0.14% and the STOXX index by -0.61%. The VIX rose 0.80 points to 21.67, while the VSTOXX rose 0.85 points to 20.89. The Nikkei index fell by -0.54%, and the Nikkei Volatility Index fell by -0.28 points to 19.92.
Robust economic data released at the end of the year pointed to a strong labor market and faster economic growth than previously thought, however the focus remains on how the Chinese reopening will affect the markets in the new year. Money managers are preparing for a moderating stock market in the coming months, and are keeping a close watch on global rates.
As I wrote before you cannot use 1std / 68% normal distribution for short-horizon market move predictions. Here is a far more accurate 50% range forecasts for the week ahead - that is the index will end the week within the range with 50% probability, and 50% outside of the range. This is more intuitive than 68% , but the main thing is that it is not based on normal distribution which is highly inaccurate for weekly returns.
Wall st delivered a mixed bag of news with VIX, VNKY, and VSTOXX and their underlying markets almost unchanged. VXD - volatility index based...
