US Stock Market Overview – Stocks Drop Sharply, Led by Energy; The VIX Surges by 49%

US stocks were hammered on Thursday as volatility surged to a fresh 3-month high. The value stocks that rallied in the last week, were the hardest hit. All sectors in the S&P 500 index were lower, led down by energy shares, consumer staples was the best performing index is a down tape. The Dow Industrials closed down 6.9%, while the S&P 500 was down 5.9%. The Nasdaq was the best performer of the major indices falling approximately 5.3%.

US wholesale prices came in stronger than expected, while jobless claims also decelerated despite declining by nearly 1.6 million claims.

The VIX volatility index was the star of the day. The index that measures the implied volatility of the  “at the money” strike prices on the S&P 500 index rallied 49% in one day, closing above 41 for the first time since mid-April as put sellers were taken to the cleaners. The surge in put-option buying accelerated the downward movement in the large-cap index.

PPI Unexpectedly Rises

US PPI came in stronger than expected to rise 0.4% last month after plunging 1.3% in April, which was the biggest decrease since the Great Recession. On a year over year basis in May, the PPI decreased 0.8%. That followed a 1.2% decrease in April, the biggest drop since November 2015. Excluding food, energy and trade services components, producer prices edged up 0.1% in May after plunging 0.9% in April,. Year over year in May, the core PPI fell 0.4%.

US Jobless Claim Rise but Continue to Decelerate

Initial claims totaled 1.54 million, compared with the 1.6 million expected and a decline by 355,000 from the previous week’s total just shy of 1.9 million. The four-week moving average fell by 286,250 to 2 million.