The Chicago Board Options Exchange Volatility Index rose, snapping a six-day streak of losses, after the gauge of U.S. stock options prices reached the lowest level since 2007.
The benchmark gauge, known as the VIX, rose 1.4 percent to 13.81 at 4:15 p.m. in New York, after earlier touching 13.22, the lowest intraday level since June 2007. The index dropped 40 percent over the previous days, the most since November 2008.
“People are just looking at these low levels as opportunity to buy portfolio protection,” Jonathan Krinsky, chief technical analyst at Miller Tabak & Co., said in an interview. “There were also a lot of eyes on it, and often times when that happens as an instrument breaks support levels, it reverses.”
The VIX tumbled a record 39 percent last week after U.S. lawmakers reached a deal to avert more than $600 billion in tax increases and spending cuts. During the week, the Standard & Poor’s 500 Index climbed 4.6 percent to 1,466.47, the highest level since December 2007. The S&P 500 rose 0.3 percent today amid investor optimism about fourth-quarter corporate earnings.
Record U.S. corporate profits and three rounds of Federal Reserve monetary stimulus have helped the S&P 500 climb 116 percent since the bull market began in March 2009. The VIX is 83 percent below its all-time high of 80.86 reached in the two months after Lehman Brothers Holdings Inc. declared bankruptcy in 2008.
“We are seeing the combination of unwinding of fiscal cliff hedges, which in the short term proved unnecessary, and a new year rally combining to crush volatility,” Alec Levine, an equity derivatives strategist at Newedge Group SA in New York, said in an interview.
Analysts predict profits at S&P 500 companies will rise 4.4 percent this year to a record $102.60 a share, according to data compiled by Bloomberg. Per-share earnings in the index probably rose 2.9 percent during the fourth quarter after increasing 4.6 percent in the previous three months, the estimates show.
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