BREAKING: The S&P 500 closes 3.0% lower erasing $1.4 TRILLION of market cap today, posting its worst day since September 2022.
The S&P 500 is now just 1.4% away from correction territory. The Nasdaq 100 is in correction territory and will enter a bear market if it falls 7.5% from current levels. In less than one month, the S&P 500 has erased $5 TRILLION in market cap. Source: The Kobeissi Letter
Volatility is back...
The average S&P 500 stock has seen a 5% one-day move after releasing Q2 2024 earnings. This marks the most volatile earnings season since the 2008 Financial Crisis, according to Goldman Sachs. By comparison, in Q1 2024 and Q4 2023, the average stock moved by ~4% one day after the release. The volatility index, $VIX, is now up ~95% over the last month alone. Volatility is opportunity for traders. Source: The Kobeissi Letter
Cost of hedging using outright puts nears YTD highs
Source: BofA, Mike Z.
A worrying divergence...
Source: J-C Parets
The Goldman US panic index is calculated as a rolling percentile of four equity volatility metrics
It spiked to one of the highest levels in two years in recent sessions... Source: Jason Goepfert on X
Even as volatility is picking up, the bull market could stay intact.
Going back to 1941, whenever the S&P 500 rose by 10% or more in the first six months of the year, it has risen by 7% on average in the second half. And the percentage of time that returns were positive in the second half of the year was almost 80% vs. 66% for any given period. The one caveat is that pullbacks in the second half tend to be deeper than the first half, averaging 9%. Source: Edward Jones, Bloomberg
The S&P 500 is down 5.7% from its closing high on July 16, the largest drawdown of the year.
The index is still up 13% year-to-date including dividends. No risk, no reward. $SPX Source. Charlie Bilello
This quarter, the reactions to the S&P 500 earnings have been less positive than usual.
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