Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Investors prepare for more U.S. stock swings as states reopen

Stock MarketsMay 15, 2020 04:55PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Traders work on the floor of the NYSE in New York

By April Joyner

NEW YORK (Reuters) - Investors are bracing for more turbulence in U.S. stocks, as some states prepare to reopen their economies and global trade tensions rise.

The Cboe Volatility Index (VIX), known as Wall Street's fear gauge, posted its biggest weekly gain in about two months, reflecting the S&P 500 index's (SPX) 2.6% slide from its April 29 high. VIX futures have jumped as well, with investors pricing elevated risk into June contracts.

Whether recent losses in stocks resulted from profit taking after April's swift rally or were the start of a prolonged decline may become more apparent in weeks to come, investors said.

Many are watching progress of U.S. states trying to reopen their economies without fueling a resurgence in coronavirus cases. Parts of New York, Virginia and Maryland moved toward lifting lockdowns on Friday, and Connecticut and Minnesota are set to ease restrictions in the coming week.

"We don't know what the new normal will be," said Alessio de Longis, portfolio manager at Invesco (NYSE:IVZ). "The managing of expectations will lead to some false steps along the way."

For now, a pile-up of worrying domestic and international news prompted investors to pull back on equities after the S&P 500 in April notched its best monthly gain in decades.

U.S. President Donald Trump has ratcheted up rhetoric on China, floating the possibility of cutting ties with the world's second-largest economy. The White House on Friday moved to block shipments of semiconductors to Huawei Technologies Co Ltd [HWT.UL] from global chipmakers, which could put pressure on a global economy already suffering its deepest contraction in decades.

Hopes for a speedy return to normal took another hit when California's state university system canceled classes for the fall semester because of the coronavirus and Los Angeles County said its stay-at-home order was likely to be extended by three months.

"What we're seeing now is the wash of realism coming over the market," said Shannon Saccocia, chief investment officer at Boston Private.

The VIX on Monday touched its lowest level since late February before reversing course as expectations for market volatility grew later in the week.

Concerns over economic reopening are reflected in the VIX futures curve, which shows investors betting volatility will be elevated in coming weeks, rather than later in the summer, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group.

The curve has fluctuated in shape over the past week. On Tuesday, front-month VIX futures (VXc1) traded at higher prices than futures expiring in subsequent months, reflecting heightened concern over near-term conditions. While that is no longer the case for now, VIX futures are broadly pricing in higher volatility than they were a week ago.

Several investors are positioning for further turbulence by shunning value sectors such as energy and financials in favor of technology and healthcare, two areas that have held up relatively well during recent market turmoil.

Andrew Graham (NYSE:GHM), managing partner at Jackson Square (NYSE:SQ) Capital in San Francisco, has focused on stocks he believes can maintain high dividend yields, especially within the pharmaceutical industry. His firm owns shares of Bristol-Myers Squibb Co (N:BMY), AbbVie Inc (N:ABBV) and Merck & Co Inc (N:MRK).

Investors will also watch the U.S. Treasury Department's first auction for its 20-year bond on Wednesday. Treasury plans to borrow a record amount of nearly $3 trillion this quarter.

Some investors said they were likely to keep equities at a slight underweight in their portfolios given the likelihood of further declines.

Dave Lafferty, chief market strategist at Natixis Investment Managers, believes the recent stock rally did not factor in the likelihood of businesses operating below their usual capacity even if states reopened their economies.

"Yes, there's going to be a strong growth rate from the bottom, but the place we're getting back to is going to be subpar for a while," Lafferty said. "Are stocks priced for subpar growth? I think they aren't."

Investors prepare for more U.S. stock swings as states reopen
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Chioma Bell
Chioma Bell Aug 06, 2020 10:12PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email