Trump Turbulence Sends Stocks on Roller-Coaster Ride

The CBOE Volatility Index surged more than 30% on Thursday as stocks sold off

Aug 18, 2017 at 2:03 PM
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Easing concerns over a nuclear attack from North Korea helped stocks start the week off on the right foot, with the S&P 500 Index (SPX) having its best day since April on Monday. Plus, an unexpectedly dovish Fed sent the Dow to its fourth straight win on Wednesday.

The bullish cards quickly came crashing down on Thursday, following a disappointing round of blue-chip earnings and continued turmoil surrounding President Donald Trump. And though stocks turned higher Friday on news Steve Bannon is being removed from the White House, the Dow and S&P are now headed for back-to-back weekly losses, while the Nasdaq Composite (COMP) pacing for its longest weekly losing streak in more than a year.

A Rare VIX Signal

As stocks sold off, the CBOE Volatility Index (VIX) -- or the stock market's "fear gauge" -- kicked into overdrive, soaring more than 30% on Thursday, and sending up this VIX signal for just the third time ever. In addition to VIX and several volatility ETNs, gold prices also also got a lift from the risk-off trading, with futures topping the $1,300 per ounce mark for the first time this year.

Oil prices, meanwhile, jumped on Friday after news that a Texas-based Exxon Mobil refinery had been shuttered. Nevertheless, the commodity is on track for a weekly loss, dragging the energy sector down with it. And while one option bull bet on a comeback for battered Transocean shares, these three oil stocks could present intriguing ideas for bearish traders.

Cisco, Wal-Mart Earnings Disappoint

A large part of the Dow's 274-point plunge on Thursday came as a result of negative earnings reactions for big-cap tech name Cisco Systems and retail behemoth Wal-Mart, which shed 4% and 1.6%, respectively. Home Depot also took a disappointing turn in the earnings confessional, but options traders were prepared. Bearish options trading has also picked up on Intel, even though it's one of the best stocks to buy after a volatility spike. Fellow Dow stocks Apple and Nike are also on this list.

Apple Outperforms FAANG Stocks

In fact, before Thursday's broad-market retreat, Apple stock topped out at a new record high of $162.52. While shares of the iPhone maker are on track to log a weekly win, other FAANG stocks weren't so resilient. Amazon, for instance, took a dive after a critical Trump tweet. Facebook, meanwhile, pared its impressive year-to-date gain, though shareholders may have been hedging with options. Alphabet is also set to end the week lower, even though analysts set a record-high price target for the Google parent. Rounding things out, Netflix is rallying strong today to pare its week-to-date deficit, but Barron's thinks a 50% haircut is in order.

Snap Stock Set to Break Six-Week Losing Streak

Elsewhere in the tech sphere, chip stocks bucked the week's bearish bias, with one analyst calling Nvidia's post-earnings pullback a buying opportunityAdvanced Micro Devices rode the sector tailwinds higher, though this other Apple supplier lagged. Facebook rival Snap -- which hit a record low on Monday -- is easily on track to break its six-week losing streak, after the stock received a rare upgrade.

Earnings Stoke Volatility

Retail earnings continued to hold Wall Street's attention. While Dick's Sporting Goods and Coach were among several names spiraling after earnings -- and Foot Locker's sharp losses dragged down athletic apparel stocks -- Ross Stores bucked the bearish retail trend in a big way. Volatile earnings reactions were seen in a number of other sectors, too. As Advance Auto Parts slid to multi-year lows after earnings, this Chinese internet stock soared to new highs.

Retail Earnings, Fed in Focus

Retail earnings will continue in earnest next week, with high-profile names like Tiffany and Abercrombie & Fitch set to report. The Fed will also be in focus, with the central bank kicking off its annual symposium in Jackson Hole, Wyoming. Following the latest White House shake-up, traders will keep a close eye on Trump's approval rating -- which could have an impact on stocks in the near term.



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