U.S. stocks just posted their biggest decline in three months, as disappointing earnings and political jitters drove volatility through the roof.
Wall Street Slams on the Breaks
Stocks declined across the board on Thursday, with the S&P 500 Index falling 1.5% to 21,750.73. All 11 sectors tracked by the large-cap index finished in negative territory, with eight reporting declines of 1.3% or more.
The S&P 500’s information technology index led the decline, falling 2%. Industrials plunged 1.7%, while telecom and discretionary shares sold off 1.6% apiece.
The Nasdaq Composite Index was the biggest loser in percentage terms, falling 1.9% to 6,221.91.
The Dow Jones Industrial Average fell 274.14 points, or 1.2%, to close at 21,750.73. All 30 index members posted declines for the first time since September.
Volatility Spikes More than 30%
Wall Street’s fear index spiked on Thursday as selling pressure engulfed equities. The Chicago Board Options Exchange (CBOE) Volatility Index rose 32.5% to 15.55, on a scale of 1-100 where 20 represents the historic mean.
The so-called “fear index” surged by a similar amount last week as geopolitical risks drove investors into the safety of haven assets.
The VIX is riding a wave of momentum, based on the RSI and MACD. As the following chart illustrates, the volatility index trades inversely with the S&P 500 the majority of the time.
Cisco, Wal-Mart Deliver Quarterly Earnings
Mixed earnings from Dow 30 juggernauts Cisco Systems Inc. (CSCO) and Wal-Mart Stores Inc. (WMT) also weighed on markets.
Cisco’s share price declined 4% after the company lowered its guidance for the first quarter of fiscal 2018. The company reported per-share earnings of 61 cents for the quarter on revenue of $12.1 billion.
Wal-Mart delivered solid results, but that wasn’t enough to prevent it from falling 1.6%. The retailing giant reported earnings of $1.08 a share on sales of $123.36 billion. Both figures topped forecasts.
President Trump Faces Backlash
President Trump is fending off criticism from Democrats and fellow Republicans over how he handled the Charlottesville race riots. Trump says “two sides” share the blame for the violence, a statement that was bitterly condemned by mainstream media. In response, business leaders cut ties to the president’s manufacturing council, with at least two high profile CEOs resigning this week.
Trump swiftly disbanded the panels in a decision that was publicized via Twitter.
The Day Ahead
A tumultuous session on Wall Street is expected to trigger similar volatility in global markets. Asian stocks are down across the board at the start of Friday trading, mirroring futures activity during the pre-market hours.
Europe’s main stock futures are also lower, hinting at a rocky start to the Friday session.
A lack of market-moving data will keep investors focused on Washington, where an embattled president is struggling to move forward with his agenda.