Wall Street flat, topping losses after Fed shock
While the S&P 500 was slightly positive by afternoon, the 10-year Treasury yield rose to 2.49 percent, only slightly below the day’s highs, as investors reset expectations after Bernanke gave a more explicit timeline for scaling back its bond-buying.Volatility has spiked since May 22 when Bernanke first hinted that the Fed may begin to rein in its stimulus measures. The CBOE Volatility Index, a gauge of anxiety on Wall Street, jumped 23 percent on Thursday to 20.49, the first time this year it closed above 20. On Friday it fell 7 percent to 18.90.
“Investors are very nervous about financials, but I think they’ll come back to the group when earnings are shown to be holding up,” said Carey, who helps oversee $200 billion. At these levels, he added, “I would look for opportunities in the group.”
Analysts pointed to the quarterly expiration and settlement of June equity options and futures contracts on Friday as another source of volatility.
About $14 billion is expected to change hands in trading related to index rebalancing towards the session’s close, which could compound volatility, according to Credit Suisse.
China’s central bank faced down the country’s cash-hungry banks on Friday, letting interest rates spike as it increased pressure on banks to curb rampant informal lending and speculative trading. Some worry that its approach could backfire, creating the potential for defaults and gridlock in the money markets of the world’s second-largest economy.
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