It wasn’t a panic, but a long-subdued measure of expected stock-market volatility was on track for its biggest one-day rise in nearly two months Monday as investors reacted to disappointing data on U.S. manufacturing activity and a tweet by President Donald Trump that underlined the scope for trade-related turmoil beyond U.S.-China talks.
The Cboe Volatility Index VIX, +18.15% , an options-derived measure of expected volatility for the S&P 500 SPX, -0.86% over the coming 30 days, rose 1.38 points, or 10.9%, to 13.99 — its biggest one-day point and percentage rise since Oct. 8, according to Dow Jones Market Data.
“Volatility has finally sprung back to life after weeks of unusually quiet trading,” said Alec Young, managing director of global markets research at FTSE Russell, in a note.
The S&P 500 fell 0.9%, while the Dow Jones Industrial Average DJIA, -0.96% dropped 268.37 points, or 1%, with both indexes suffering their biggest one-day point and percentage decline since the same date. The moderate declines appeared largely orderly, with the historical comparisons offering more a reflection of just how subdued trading action has been in recent months.
And even with the rise, the VIX remains well below its long-term average around 19 after last week posting its lowest close since August 2018 — a decline that led some market watchers to declare equity investors were growing complacent about downside risks as major stock indexes hit a series of records in November.
A large number of short bets on volatility futures by speculators had also heightened concerns of a potential blow-up, stirring memories of early 2018, when a massive round of short covering sent the VIX soaring and was blamed for an equity selloff. Futures bets on falling volatility by potentially weak-handed speculators topped 2018 levels to reach a record, analysts at