"Fear Index" Plunges Over 12% after Powell's Remarks

Global financial markets breathed a sigh of relief on Friday after U.S. Federal Reserve Chair Jerome Powell signaled the possibility of future interest rate cuts, sending the closely watched “Fear Index” tumbling more than 12 percent.

The CBOE Volatility Index (VIX), widely known as Wall Street’s “fear index”, dropped by 12.71 points, or 2.11 percent, to settle at 14.49, marking one of its sharpest single-day declines this year. The move reflected a wave of investor optimism following Powell’s speech at the Fed’s annual Jackson Hole symposium, where he acknowledged ongoing economic uncertainties but hinted at policy flexibility.

“High levels of uncertainty continue to challenge policymakers,” Powell told the gathering of central bankers and economists. “We are mindful of both the risks of persistent inflation and a cooling labor market.”

Equities surged in response. The Dow Jones Industrial Average soared 960 points, or 3.15 percent, reaching 45,740 in mid-session trading. The broader S&P 500 advanced 102 points, up 1.6 percent at 6,472, while the tech-heavy Nasdaq Composite climbed 384 points, or 1.82 percent, to 21,484.

Gold also benefited from the improved market sentiment, with futures rising $3,370, or 1 percent, to $3,415.30 per ounce.

The remarks come just weeks after the Fed opted to keep interest rates unchanged at its July 30 policy meeting, holding the benchmark range at 4.25 to 4.50 percent. That decision defied repeated calls from President Donald Trump, who has urged the central bank to slash rates by three full percentage points in a bid to stimulate growth.

The Federal Open Market Committee (FOMC) has so far resisted such political pressure, underscoring its commitment to balancing inflation risks with the resilience of the U.S. labor market.

The VIX, derived from S&P 500 options pricing, measures market expectations of volatility over the next 30 days. Higher readings typically reflect investor anxiety and potential turbulence ahead, while lower readings suggest calmer trading conditions.

Friday’s sharp decline in the index indicates that traders see less immediate risk in equities,  at least for now.