Dow Jones Industrial Average Plummets, 'Fear Gauge' Spikes Amid Chinese Growth Concerns

The CBOE Volatility Index (VIX), or the market's 'fear barometer,' is comfortably higher

by Andrea Kramer

Published on Dec 9, 2014 at 11:42 AM
Updated on Apr 20, 2015 at 5:32 PM

The Dow Jones Industrial Average (INDEXDJX:DJI) is on pace for its second straight triple-digit drop, as U.S. stocks take their cues from China. Growth concerns from the Asian nation have accelerated in the wake of fresh collateral restrictions for loans, sending the Shanghai Composite to a 5.3% loss. The news has trumped relatively upbeat data on the domestic job front, as the latest Job Openings and Labor Turnover Survey (JOLTS) indicated the number of open positions soared to a 13-year high in October.

Against this backdrop, speculators are shunning equities in favor of "safe havens" like gold, with the malleable metal flirting with a 2% gain. At last check, the Dow has surrendered 177 points, or 1%, the S&P 500 Index (SPX) is 18.5 points, or 0.9%, lower, and the Nasdaq Composite (COMP) is 39.8 points, or 0.8%, in the red.

Continue reading for more on today's market -- and don't miss:

  • Dismal earnings and a surprise executive departure have dragged this consumer products specialist to new lows.
  • How options traders and analysts are waxing optimistic on this yoga apparel maker ahead of earnings.
  • Plus ... Checking in on the CBOE Volatility Index (VIX), the SPDR S&P 500 ETF Trust (SPY), and other noteworthy stats at midday.

Midday Market Stats

Among the stocks with notable put volume is natural gas issue Chesapeake Energy Corporation (NYSE:CHK), which is trading higher for the first session in four. The stock is bucking the broad-market trend lower, up 1.4% at $18.27, but maintains a year-to-date deficit of 28.8%. However, the equity's 14-day Relative Strength Index (RSI) sits at 26 -- in oversold territory, suggesting CHK may have been due for a short-term bounce. In the options pits, put volume is accelerated compared to average intraday levels, and has more than doubled CHK call volume thus far. Digging deeper, it looks like traders are expecting CHK to resume its longer-term downtrend and hit fresh two-year lows, buying to open the January 2015 14-strike puts.

For more midday statistics and stocks on the move, head to page 2.

One of the major Big Board decliners is wireless concern T-Mobile US Inc (NYSE:TMUS), which is down 6.1% at $26.47. The company last night unveiled a new public offering of preferred stock, and this morning was slapped with a price-target cut to $33 from $34 at Macquarie (though the brokerage firm maintained an "outperform" assessment). Looking ahead, TMUS Executive Vice President and Chief Financial Officer J. Braxton Carter will speak at 10 a.m. ET tomorrow at the annual UBS Global Media and Communications Conference in New York.

Over on the Nasdaq, DreamWorks Animation SKG, Inc. (NASDAQ:DWA) is among the biggest losers, down 4.8% at $20.80, due to another bearish brokerage note. Specifically, Topeka Capital downgraded DWA to "sell" from "hold," and cut its price target to $17 from $23, citing a lackluster sophomore weekend for Penguins of Madagascar. It's been a volatile year for DWA, though the stock is sitting on a year-to-date loss of more than 41%. Amid M&A rumors, the shares gapped higher in both late September and mid-November, but ran into a familiar wall in the $27-$29 region. The equity is now trading in the lower end of its recent range, and could find a foothold in the round-number $20 area, which has contained most of DWA's pullback in the latter half of the year.

Daily Chart of DWA Since January 2014

The CBOE Volatility Index (VIX) is up 1.7 points, or 12%, to 15.91. The market's "fear barometer" is set to end atop its 50-day moving average for the first time since Oct. 27, and has gained more than 21% so far in December.

Today's put/call volume ratio on the SPDR S&P 500 ETF Trust (SPY) is 1.35, with puts having the edge over calls. SPY is down 1.9 points, or 0.9%, at $204.73.


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