NEW YORK (Reuters) - The Cboe Volatility Index , known as Wall Street’s “fear gauge,” jumped to its highest level in more than a month on Thursday as concerns over a resurgence of the novel coronavirus pandemic felled U.S. stocks.
The VIX rose to 40.79, its highest closing level since April 23. It registered its biggest daily point gain since March 16, in the midst of the plunge that signaled the end of the nearly 11-year bull run in U.S. stocks.
The S&P 500 .SPX ended 5.9% lower on Thursday.
Some investors said they believed such a pullback was long overdue given expectations for a slow recovery, which Federal Reserve Chair Jerome Powell reinforced in remarks on Wednesday.
“We’ve been cautious on equities for a while now,” said Anwiti Bahuguna, head of multi-asset strategy and senior portfolio manager at Columbia Threadneedle Investments. “By no means is the virus threat over, on top of the fact that we are not going to recover quickly.”
Indeed, despite a sharp run-up in stocks over the past few weeks, expectations for volatility had remained elevated. The VIX rose on Monday even as the S&P 500 gained 1.2% and momentarily erased its year-to-date losses.
Speculative buying activity likely increased the demand for downside protection and contributed to the rise in the VIX even before stocks fell later in the week, said Don Dale, chief risk strategist at Equity Risk Control Group.
“There was a greater interest in hedging now that we were back to unchanged” on the S&P 500, he
