U.S. equity volume reached the lowest level since at least 2008 excluding holidays and volatility slid to a five-year low as vacationing traders awaited policy clues from the Federal Reserve’s summit in Jackson Hole, Wyoming.
About 4.5 billion shares changed hands on all venues, the lowest level in data compiled by Bloomberg going back four years that excludes the days surrounding New Year’s, Christmas, Thanksgiving and Independence Day. The Chicago Board Options Exchange Volatility Index, known as the VIX, lost 7.1 percent to 13.70, the lowest level since June 2007.
U.S. equity volume has fallen as investors speculated on whether the European Central Bank will start buying bonds to lower borrowing costs and if the Fed will take steps to deliver more stimulus. The VIX, which tracks the cost of protecting against a drop in U.S. stocks, has slumped as Standard & Poor’s 500 Index reached the highest level since April last week.
“We’re getting to a point where everybody is going to be on hold waiting for some action out of the ECB and the Fed,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “At this time of the year, there are fewer people in the office.”
Daily volume on U.S. equity exchanges has averaged 6.67 billion this year, 15 percent less than the average from last year, according to data compiled by Bloomberg. That compares with 8.5 billion in 2010.
The Fed chairman will have a chance to talk about policy options when he speaks to economists and central bankers at the Kansas City Fed’s conference in Jackson Hole, Wyoming, Aug. 30 to Sept. 1. His speech at the 2010 conference set the stage for a second round of large-scale asset purchases, which the committee started in November that year.
The S&P 500 today snapped a six-day rally, which had been the longest winning streak since December 2010, amid slowing global growth. The benchmark measure for U.S. stocks had risen for five straight weeks through Aug. 10 in the longest advance since March amid better-than-expected earnings and optimism that global central banks will take actions to stimulate growth.
About 72 percent of S&P 500 companies reporting second-quarter results have beaten analysts’ earnings estimates, according to data compiled by Bloomberg. Recent reports on jobs countered reports showing a contraction in manufacturing and cooler consumer demand. Yet an unemployment rate that has been stuck above 8 percent since February 2009 is one reason why the Fed signaled it may act to boost the economy.
“We’re in a trading range for the market because nothing’s fixed but nothing has really come apart yet,” John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, said in a phone interview. His firm oversees $201 billion. “Volatility will not come back up until we get more worried.”