Market check: Stocks fall amid heightened volatility

Yahoo Finance's Jared Blikre breaks down what the elevated market volatility means for stocks and bonds, plus how Omicron COVID variant concerns are impacting various sectors.

Video Transcript

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- Welcome back to Yahoo Finance Live. We are eight minutes into the trading session on this final day of November, 2021. Let's head down to the floor of the New York Stock Exchange, where Yahoo Finance's Jared Blikre has been watching the action. Jared, red across the board, yeah?

JARED BLIKRE: Yeah, I'm looking at some of the boards here. Not a lot of green, except for the VIX, and we'll get to that in a second. I do want to check out the WIFI Interactive. I have the S&P 500 over the trailing month. Each one of these bars represents one day.

You'll notice here that this big red bar-- that is from Friday in the breakdown area. And this has to do with what I was talking about 24 hours ago. The breakdown area was right around 4,650, 4,660. And that is precisely where we sold off yesterday. I said I wanted to see two closes over 4,650. And we got one technically yesterday, but maybe it won't happen today. We'll have to see.

Now when we take a look at the market under the hood, and we start looking at things like the VIX, we're seeing elevated volatility. And these swings in the VIX have gotten more extreme this year and basically since the pandemic period. We also have something called the VIX of the VIX. This is the volatility of the VIX. This has been picking up an elevated as well.

So there are some cracks under the hood here that we're looking at. Brian Sozzi, I know that you were-- we were tweeting about the Hindenburg omen. And it's a decent indicator of when you should be a little bit risk averse in the market. But it's not a system as of itself.

I happen to look at a lot of other things. I'm looking at the bond market. You know, you take a look at what the five-year T note yield is doing here. Let me just put a line chart, so we can see the real volatility that's happened since last week. This is incredible for the bond market.

The problem is, when you have all this volatility in one asset class or multiple asset class, and it hasn't spread to another one, it kind of creates a situation. It's like a coiled spring just waiting to explode. And that's what we have here. So we want to know, when is it going to explode?

Well, seasonality favors the bulls. And so we could very well have a Santa Claus rally into the end of the year, into early January. And that's when we let the spring out. Or it could happen because omicron is a little bit worse than expected, not priced in.

My point is that the market is at a razor's edge right now. I think a lot of portfolio managers-- probably not doing a lot of buying. They're just waiting to see what they're going to sell, if anything, and they're hedging. Hard to see what new trades are being put on, given the extreme uncertainty that we've seen.

Also, the last day of the trading month, so I want to go straight to our sector action and see what's happened over the last month. And it's instructive. The outperformers have been tech. That's up 5%, XLK in the upper left, followed by consumer discretionary and then materials. Interesting there, but that's probably a play on the stronger dollar.

What you notice is what's in red-- financials and energy, each off more than 4%. This is a complete reversal of the reopening trade that we had seen the month prior. Also want to show everybody my canaries. Now these are some sentiment. A lot of these are ETFs. Some of these are indices.

You'll notice in the upper left, the stocks. That is the Philly Chip Index. Semiconductors really outperforming, the growth stocks have been outperforming over the last month, followed by, interestingly, home builders, transports, and then retail. Retail and transports, barely in the green here.

But you take a look at what has been shed. It's all these risk assets. In the lower right, we got BETZ. That's a gambling ETF. That is off 18%. MJ is a cannabis ETF. That's off 9%. TAN-- solar ETF. IPO-- we know what that is. KWEB-- that's a China ETF. EEM, IBB-- that's biotech.

A complete reversal over the last month. So everybody-- I think a lot of portfolio managers were hoping on riding the Santa Claus rally into the end of the year. But if that doesn't materialize, there's going to be-- I would say, watch out below.

- You know, if it wasn't for the fact that we were taking this Yellen/Powell testimony, we would have you and Brian Sozzi do a segment about the Hindenburg omen, maybe the Titanic syndrome as well. I want you guys drawing blimps and ships on our WIFI Interactive. Yahoo Finance's Jared Blikre. Thanks so much.

Well, again, it is a down day, but we like to keep it positive here on Yahoo Finance. So for our stat of the day, we want to highlight that when we look at previous instances where the VIX index spiked more than 40% in one day, as it did in that brutal day after Thanksgiving session, stocks were higher 18 out of 19 times a year later.

The average gain was about 20%. That comes from Truist co-chief investment officer Keith Lerner. Well, on the other side of this break, we will dig more into that breaking news that we got yesterday regarding Twitter CEO Jack Dorsey stepping down immediately. We'll have a full breakdown of what that means for the company with Evercore ISI's Mark [? Mahaney ?] on the other side of this break.