Washington
What had just occurred?
The largest indicator of the stock market, the S&P 500, fell Wednesday afternoon, beginning shortly after 2:00 pm ET. It was expected to break the record, the first in almost two years.
The bottom then dropped out. The index dropped by half a percentage point in a matter of minutes. It dropped almost 1% in less than an hour, and by the end of the day, it had dropped almost 1.5%. After rising by approximately 100 points, the Dow finished the day roughly 500 points lower.
Wednesday saw a more than 7% increase in the VIX volatility index, which peaked at roughly 3 pm ET before considerably declining. At the end of the day, CNN’s Fear and Greed Index, which had begun the day firmly in “Extreme Greed” zone, had reverted to “Greed” territory.
Remain calm. During the latter weeks of the year, this is essentially typical. Most traders are taking vacations. The so-called Santa Claus rallies, in which markets rise near the end of the year when few people are paying careful attention, are frequently the result of that extremely low volume.
FactSet informed traders that, despite the selloff, “nothing really new from a narrative perspective as things continue to slow into the holidays and year-end.” “No obvious spark for today’s drop” was present.
High volatility might also be a sign of low trade volume. People started to literally and figuratively head for the exits as surviving traders chose to stuff some freshly obtained earnings into their pockets.
Concerned still? Let’s go on a little trip down memory lane.
The Dow fell 765 points on December 15, 2022, for no apparent cause at all. Several market analysts brought up “recession fears,” but these proved to be baseless. And the Dow fell 200 points on December 30, 2019. The day was described as “relatively devoid of news” in a CNN Business piece.
The Dow fell 4,000 points during a 10-day period at the end of 2018, but it recovered to have one of the biggest days ever — a gain of 1,086 points — before a wild day the following trading day almost erased all those gains. This was the mother of all end-of-year market turmoil events.
Now, inhale deeply… and prepare yourself for a few hiccups as the year draws to a close.
