Stocks spin out, volatility, gold pulls back: Market Takeaways

US stocks (^DJI, ^IXIC, ^GSPC) sank on Friday, spiraling out after President Trump threatened China with tariff hikes and dragging the major market averages into negative territory for October so far.

Yahoo Finance markets and data editor Jared Blikre breaks down the biggest market themes from this past trading week, including spiking volatility (^VIX) and gold (GC=F) pulling back from its new record highs.

To watch more expert insights and analysis on the latest market action, check out more Asking for a Trend.

Video Transcript

00:01 Josh

President Trump's renewed terror threat spooked Wall Street. The S&P 500, the Nasdaq seeing their worst day since April as the Dow sinks 800 points. Yahoo Finance's Jared Blikre joins us now with the train day takeaways. Jared.

00:13 Jared

Josh, October is now turning negative and that's because of that outsize underperformance or I guess sell off that we saw earlier today. And uh this was the first 2% down day that we've seen in the S&P 500 since April. That kind of generates its own headlines because people who watch those kinds of metrics think certain things about what they're going to do with that. Are they going to buy the dip? Are they going to look for a more protracted sell off? But let's focus on the damage done today. XLK, that's tech down the most. That was down 4%. And then just taking a look at my leaders, you don't have to concentrate on the particulars except Kweb, that's China Internet. That's not surprisingly down the most because that was the source of the headlines that we saw earlier.

00:46 Jared

The only thing in the green, uh safe corporate bonds and low volatility. So it was really, really risk off today, but not entirely unexpected.

00:54 Josh

So, dip buying opportunity, my friend, or not or or start of a larger pullback.

01:03 Jared

Yeah, I think that's in entirely in Trump's hands right now because he controls the narrative. And if you remember what happened right after Liberation Day, we only saw a mild sell-off. and in fact, what happened was rates went down and that's one of the things I'm watching right now. We had a big drop in rates, that's 10 year down 10 basis points. But then, as things got worse than people expected, rates went the opposite way. That meant that people were dumping bonds as they were dumping the dollar. And so that's something that I'm going to be watching out for next week, but so far that's not the case. So to put it uh very succinctly, I think this is more of a one-off and I do think people are going to come in and buy the dip. The question is, do they get run over? That can only be answered by President Trump right now.

01:41 Josh

Mhm. We move on.

01:43 Jared

Yes, we do. So let's take a look at volatility here because that's the second thing in my uh in my playbook. and the VIX now, it just climbed above 20 and we haven't seen it a handle like that, I think since April and that's not surprising because that was the post liberation day regime. But what you're going to notice in this year-to-day chart is we are nowhere near the highs that we saw uh earlier and that was uh in the wake of all that. Even at the worst sell off, I think we got a a 60 handle in the Vix. So today is just a minor shadow of that.

02:20 Jared

It's really going to take a lot more than just this one day to produce more fear. and remember the VIX is not necessarily a fear a fear gauge as uh Steve Sosnick likes to say, it's a measure of institutional hedging activity. So, the big guys, they're a little bit scared, but they're not too scared, they're not too disrupted right now. I think they're going to jump back early in the market next week. Do they get run over? That's the big question, but I'll be watching rates for that answer.

02:50 Josh

Should we do a quick check on gold here?

02:52 Jared

You bet because with gold, oh, you know what? I forgot I had a volatility map. This is uh so I just want to rewind a little bit. This is what usually happens with the Vix during the year and this is prime time uh spike season. So this is not entirely a surprise. We were just talking a few days ago about about how the VIX had turned started turning up. Well, now we got the catalyst. So this would be uh par for the course for volatility. Now we can check gold, right?

03:22 Josh

Now let's talk some yellow metal. Come on.

03:23 Jared

All right, right. Um, 4,000, is it a sticking point? I got a really interesting uh note from Todd Sown over at Strategas ETF research. He tracks ETF flows and one of the things that he noticed is that, let me just pull up a year to date chart of gold so we can all ogle that as I talk here. Um, he says that if you go back to 2020, we had a big spike in gold and if you track the one-year flows, they reached $38 billion. Well, we are at that inflection point right now. What happened in 2020 when we hit that point? Gold prices rolled over.

03:59 Jared

So that's a yellow caution flag. I think there are tremendous uh tailwinds for gold right now. I would definitely not short it. If you own it, congratulations. But just know that around this price level 4,000, things could go sideways for a little bit. same for silver.

04:21 Josh

What's on your radar next week?

04:22 Jared

I'm really going to be watching the rates market. I don't want to see rates turn higher and especially spike higher day after day. That tells me that people are dumping the US dollar and they're dumping bonds again and that's going to cause a lot more trouble to for equities. If that doesn't happen, I think we're going to see tremendous dip buying.

04:41 Josh

All right. Thank you, buddy. Appreciate it.

04:43 Jared

You bet.

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