substantial technology stocks, after propelling the broader market upward, are entering a turbulent period based on investors’ expectations of volatility over the next 30 days, the Wall Street Journal reports. Specifically, the CBOE Volatility Index (VIX), which is derived from prices of options linked to the S&P 500 Index (SPX), closed Monday at a value of 11.22. Meanwhile, the even more tech-driven CBOE Nasdaq-100 Volatility Index (VXN) closed at 18.74, darting up from a close at 12.91 on June 2. The ratio of 1.7 between the two volatility indexes is near its highest level in 10 years, the Journal says.
Technology and Internet stocks abruptly reversed course on June 9 and bear lost ground since. While substantial tech stocks, most notably Apple Inc. (AAPL), Facebook Inc. (FB) and Google parent Alphabet Inc. (GOOGL) rose Wednesday, the group fell 5.3% from final month’s closing high though Monday, the Journal indicates. Some technology bulls are sensing a buying opportunity as other investors sell shares on concern that many techs with rich valuations are due to drop further. (For more, see also: Apple: The Opportunity We bear Been Waiting For.)
The tech-heavy Nasdaq 100 Index typically is more volatile than the S&P 500, the Journal notes, but their respective CBOE volatility indexes, the VXN and the VIX, tend to trek in roughly the same direction over extended periods, the Journal notes. whether historical relationships hold, meaning that the current ratio of 1.7 between the VXN and the VIX narrows, that leads to one of two conclusions, the Journal observes. Either volatility for the broad S&P 500 is due to rise, or volatility for the Nasdaq 100 is poised to tumble.
It is worth noting that three aforementioned substantial tech stocks, as well as their fellow FAANG constituents Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX), are included in both the S&P 500 and the Nasdaq 100, according to CNBC. Software giant Microsoft Corp. (MSFT) is another tech leader included in both indexes. As for their future direction, opinion is divided among investors and strategists. (For more, see also: FAANG Short Bets Top $27 Billion and Why Tech Stocks Will Surge Again.)
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