Technology Shares Leading US Markets Higher; Keep Your Eye on the VIX

The major U.S. stock indexes rallied on Thursday with the technology-driven NASDAQ Composite posting the strongest gains. The benchmark S&P 500 and blue-chip Dow Jones Industrial Average followed with relatively small gains of their own with gains limited by worries over first-quarter earnings.

The NASDAQ continues to outperform the two indexes because of the stellar performances by Amazon.com Inc. and Netflix, Inc., which rose to record highs as sweeping stay-at-home orders drove demand for online streaming services and home delivery of goods.

In the cash market on Thursday, the S&P 500 Index settled at 2799.55, up 16.19 or +0.62%. The Dow Jones Industrial Average finished at 23537.68, up 33.33 or +0.15% and the NASDAQ-Composite closed at 8532.36, up 139.18 or +1.79%.

While Amazon and Netflix were primarily behind the strength in the NASDAQ, Boeing Co. was a drag on the Dow as its European rival Airbus said it was examining requests to defer deliveries after a collapse in travel demand.

Earnings Recap

Morgan Stanley wrapped up earnings for the big U.S. lenders, reporting a plunge in quarterly profit as its advisory and wealth management businesses took a hit from the economic fallout of the pandemic.

Analysts estimate earnings for S&P 500 companies slumped 12.8% in the first quarter, which would be the biggest quarterly decline since the financial crisis.

First-quarter earnings kicked off this week with U.S. banks preparing for a wave of future loan defaults following a halt in business activity.

Options Markets Send Cautiously Bullish Signal on U.S. Stock Rally

Signals from the options market are suggesting that some investors believe the gains from the blistering three week rally on Wall Street may endure.

The CBOE Volatility Index, known as “Wall Street’s fear gauge,” ended below 40 on Tuesday for the first time since March 5, after rising as high as 82.69 during a sell-off that took the S&P 500 down as much as 34% from its peak.

That 40 level is a significant one for some VIX watchers:  The previous bull market began in March 2009, when the VIX fell to similar levels after having hit a closing high of 80.86 in November 2008, according to Reuters.

While plenty of uncertainty remains, the majority of options indicators “are pointing in the right direction,” said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research.