What’s the Stock Market Doing Today?

Darrin Eakins

October 18, 2022

What's the Stock Market Doing Today?

If you are curious about the state of the stock market today, you might find it useful to look at what has happened recently. This may include a change in Federal Reserve policy or a vote by the U.S. Senate regarding abortion. The impact of these events can affect the price of stocks.

The volatility of the stock market

Volatility is the percentage of time the price of a stock moves by more than one percent. During periods of heightened uncertainty, stock markets can be very volatile. The average annual volatility is about fifteen percent. This means that most stock market periods are calm, interspersed with periods of higher volatility. Volatility is high but not too high. Stock prices do not jump up and down all the time, and there are long periods of low volatility and short periods of big moves, which skew the average volatility. Low volatility is associated with bullish markets, while high volatility is correlated with bearish markets.

One indicator of stock market volatility is the CBOE Volatility Index or VIX. It gauges investors’ expectations for stock prices over the next 30 days. Its calculation is complex, but it gives a general idea of how volatile a market is. When the VIX rises above thirty, it typically indicates that the stock market is about to experience massive price swings.

Volatility is important for investors and traders alike, but it’s not the same as risk. While volatility is important for people who want to sell stocks soon, it’s not a factor for long-term investors. Instead, they want to hold their investments and let them compound over a long period.

Impact of Federal Reserve policy change

The recent increase in the Federal Reserve’s interest rate is causing volatility in the stock market. The Fed has been increasing interest rates by three percentage points since March, and this rapid rate of change has given the market little time to adjust. It has also led to volatility in the Treasury market, which has not been seen since March 2020.

Investors are concerned that the Fed’s rate hikes will slow economic growth and push the economy into recession. This could hurt equities further because the U.S. economy is already slowing. Ford, for example, dropped 12.3%, the biggest decline in the S&P 500. In addition, the company recently cut its third-quarter profit guidance and warned of the damaging effects of inflation.

The Fed pledged to curb inflation. However, a slowing economy could lead to higher unemployment, hurting businesses and households. In addition, the move to raise interest rates was widely expected, but it still has the potential to hurt the stock market. As a result, traders hope Fed Chair Powell will keep talking tough as the central bank approaches its policy decision.

The Federal Reserve is working to control the inflation rate and ensure maximum employment. The current goal is to keep the price level below 2%. However, the Fed’s recent action has led to volatility. The Fed has been implementing an aggressive policy to prevent the economy from recession.