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Volatility soars as Mid-East tension rocks US stocks

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Volatility soars as Mid-East tension rocks US stocks

US stocks started the trading session on a defensive note, moving lower as tensions in the Middle-East gripped the capital markets.  On the heels of the Secretary of States comments on Monday that Syria used chemical weapons against its own people, carried out by the Syrian regime, has driven stock investors into safe haven products.  As investors have scrambled to exit stocks, implied volatility on the S&P 500 index has spiked.  Stocks ended the trading session with the worse day in the past 3-months.

The VIX volatility index, which measures the at the money calls and puts on the S&P 500 index pushed above resistance near the 50 and 200 day moving averages, moving average moving average 15% as investors look for protection against an adverse move in stocks.  The scale and degree of the US’s response to this attack will likely be the catalyst for further volatility in the equity markets.

Gold stocks initially benefited from the recent tensions in the Middle East with the yellow metal recapturing the 1,400 per ounce level, pulling investors into mining stocks.  The benefit was short lived despite the rally in gold, as mining stocks turned lower, leading the broader markets down. Oil prices have also benefitted climbing more than $3 per barrel.  Yields have also moved lower as investors exit stocks moving into safe haven bonds, but the decline in yields seemed to have little effect on stock investors.

In US economic news the S&P/Case Shiller housing price index showed that single-family home prices increased in June. The S&P/Case Shiller composite index of 20 metropolitan areas rose 2.2 percent compared to a 1 percent rise in May.  On a year over year basis, prices were up 12.1 percent, in line with economists’ expectations. Prices were up 12.2 percent in the year to May, the biggest gain in more than seven years.

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