VIX falls to lowest level in 24 years
U.S. stocks ended essentially unchanged on the day on Monday, with major indexes retreating from an early advance that took key indexes to fresh records, but waned as materials shares offset a rise in the energy sector.
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Trading activity was listless after Emmanuel Macron's closely watched, but expected, presidential election victory in France on Sunday, though the removal of a potential geopolitical headwind took the CBOE Volatility index to its lowest levels in decades.
The Dow Jones Industrial Average rose 4.1 points to 21,011.05. The S&P 500 slipped 0.1 point to 2,399.16, after briefly hitting a new intraday record of 2,401.23 in early trading. The Nasdaq Composite Index also touched an intraday all-time high, at 6,106.12, but ended at 6,102.66, up 1.9 points on the day. All three indexes moved less than 0.1%.
While major indexes saw little activity on the day, there were larger moves within specific sectors. The biggest drag on markets was materials (XLB), which fell 0.9%, although that was offset by a 0.7% rise in the energy sector (XLE).
A lack of surprise in the French election left investors struggling to find new catalysts to keep pushing shares higher, but the easing of geopolitical anxiety contributed to the 7.4% decline in the VIX, which fell as low as 9.72, its lowest level since 1993 (http://www.marketwatch.com/story/wall-streets-fear-gauge-just-hit-its-lowest-level-in-24-years-2017-05-08). If the so-called "fear index" closes under the level of 10, that would mark only the 11th such time it has closed in single digits since debuting in 1990.
See more: A popular gauge of Wall Street fear threatens to hit rock bottom (http://www.marketwatch.com/story/is-this-the-day-wall-streets-fear-gauge-hits-rock-bottom-2017-05-08)
Volatility was seen as likely had nationalist candidate Marine Le Pen won, as she had proposed removing France from the European Union. Investors had backed Macron because he was seen as a safer choice for regional stability, and not because of the specifics of his policies.
"I think Mr. Macron is in for tough challenges from both the left and the right and the country may, in effect, become ungovernable, before all is said and done," Mark Grant, chief strategist at Hilltop Securities, wrote in a research note. He added that for investors, "the rejoicing may be brief."
Asian stocks were one of the few places to get a positive boost (http://www.marketwatch.com/story/nikkei-other-asian-markets-surge-after-macrons-victory-2017-05-07)from Sunday's victory for Macron. European stocks pulled back from a nine-year high (http://www.marketwatch.com/story/european-stocks-pull-back-from-21-month-high-after-macron-wins-french-election-2017-05-08), with the French CAC 40 index closing down 0.9%.
Grant said some investors may shift the focus to French parliamentary votes in June, with questions about Macron's ability to build a majority.
"It is entirely possible that [Macron] won't secure enough seats to push through his agenda. His party will face stiff opposition for the two main French political parties as well as the Le Pen group, which are far better organized, in my opinion, than Mr. Macron's group...I think the investment focus will shift, and rather quickly, to the Parliamentary elections and the governance of France as skepticism grows, once again, about the French economy, and the place of France in the European Union."
Read:Macron handily wins French presidential election -- seen as an upbeat sign for the stock market (http://www.marketwatch.com/story/macron-handily-wins-french-presidential-electionan-upbeat-outcome-for-wall-street-2017-05-07)
See also:Investors are breathing a sigh of relief over France, for now (http://www.marketwatch.com/story/investors-are-breathing-a-sigh-of-relief-over-france-for-now-2017-05-07)
Recent action in equities has been slight, and the S&P has moved less than 20 points in either direction for nine consecutive days, the longest such streak since 1961. However, some say that could be a good omen for stocks going forward (http://www.marketwatch.com/story/stocks-just-did-this-for-the-first-time-since-the-beatles-landed-in-us-2017-05-06).
In the latest commentary from Federal Reserve officials, Cleveland Federal Reserve President Loretta Mester said the Fed must be "very vigilant against falling behind (http://www.marketwatch.com/story/feds-mester-warns-against-going-too-slow-with-interest-rate-hikes-2017-05-08)" on needed interest-rate hikes, adding that "we could risk a recession" if the central bank delayed too long on normalizing rates.
Separately, St. Louis Fed President James Bullard said the Fed's benchmark federal-funds rate is close to where a famous mathematical rule recommends it should be (http://www.marketwatch.com/story/feds-bullard-says-target-interest-rate-is-close-to-where-taylor-rule-recommends-2017-05-08).
Stocks on the move: Shares of Kate Spade & Co.(KATE) jumped 8.3% on news that luxury handbag retailer Coach Inc.(COH) will buy its rival in a deal valued at $2.4 billion. (http://www.marketwatch.com/story/kate-spades-stock-soars-after-24-billion-coach-buyout-deal-2017-05-08)Shares of Coach rose 4.8%.
Sinclair Broadcast Group Inc.(SBGI) announced a deal to buy Tribune Media Co.(TRCO) for close to $4 billion, in a tie-up that would combine two of the country's biggest local-television operators (http://www.marketwatch.com/story/sinclair-broadcast-to-buy-tribune-media-in-39-billion-deal-combining-2-largest-us-station-owners-2017-05-08). Shares of Sinclair sank 2.2% while Tribune rose 5.2%.
A number of companies saw big moves thanks to comments out of the Sohn hedge-fund conference, where a number of fund titans gave their top investment ideas.
Read: Sohn hedge fund conference live blog: Ackman, Einhorn, Gundlach offer top picks (http://blogs.marketwatch.com/thetell/2017/05/08/sohn-hedge-fund-conference-live-blog-ackman-einhorn-gundlach-offer-top-picks/)
(http://www.marketwatch.com/story/advice-from-berkshires-annual-meeting-stay-sane-be-honest-2017-05-07)Other markets: In Asia, Japan's Nikkei 225 index reached a 16-month high (http://www.marketwatch.com/story/nikkei-other-asian-markets-surge-after-macrons-victory-2017-05-07) and Korea's Kospi hit an all-time high, helped in part by the French election result, but also enthusiasm following the U.S. jobs report.
Oil prices traded up and down on Monday (http://www.marketwatch.com/story/oil-rebounds-on-expectations-of-more-opec-production-cuts-2017-05-08), with West Texas Intermediate crude futures last up 0.4% at $46.42 a barrel, after tumbling around 6.3% last week. Crude made an attempt to retake the $47 level after Saudi Arabia's oil minister said a deal to cut production could be extended into 2018, before backing off.
Gold prices rose less than 0.1%.
Opinion:The commodity conundrum -- why are prices so weak? (http://www.marketwatch.com/story/the-commodity-conundrum-why-are-prices-so-weak-2017-05-08)
The dollar was flat (http://www.marketwatch.com/story/euro-slips-from-6-month-high-as-macron-relief-rally-loses-steam-2017-05-08), as measured by the ICE U.S. Dollar Index , but it was stronger against the euro , which slipped from a six-month high as a relief rally linked to the French election lost steam.
(END) Dow Jones Newswires
May 08, 2017 16:25 ET (20:25 GMT)