Morningstar Volatility Report for February 19, 2010

In aggregate, the option market believes it can much better handicap the current drivers of uncertainty as the VIX fell by more than 5 percentage points to 20%, approximately the long-term volatility level of the S&P 500. Prior to the recent bout of concerns and three-week market decline, the VIX had slowly decayed from its 2009 market crash highs north of 80% to close a month ago at 17.91%.

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Small Stock UncertaintyThe spread between implied volatility on the Russell 2000 index of small stocks (RVX) and the VIX index of implied volatility on the large-cap S&P 500 closed the week at 3.6 percentage points, up 1.5 percentage points from a week earlier, placing the RVX at 23.6%. [Read the full article]

NEW YORK — Standard & Poor’s/Case-Shiller releases its December and fourth-quarter index of home prices, 9 a.m.; the Conference Board releases the Consumer Confidence Index for February, 10 a.m.

WASHINGTON — House Energy and Commerce subcommittee hearing on the problems with Toyota’s gas pedals. Among those invited to testify are Jim Lentz, president of Toyota Motor Sales USA, and David Strickland, the head of the National Highway Traffic Safety Administration; House Financial Services Committee hearing on whether an additional stimulus package is needed; House Transportation and Infrastructure Committee hearing on a one-year progress report on the stimulus program; Senate Commerce, Science and Transportation Committee hearing on cybersecurity.

Germany’s Ifo institute releases its closely watched monthly index of business confidence in Europe’s biggest economy. [Read the full article]

U.S. stocks rose on Friday as investors took the Federal Reserve’s discount rate increase as evidence the financial system is healing but worried the eventual withdrawal of easy money will hurt Wall Street.

Even as stocks closed out their best week of the year, investors were not convinced by the Fed’s reassurance that its benchmark rate will remain near zero for an extended period of time.

“Investors know the Fed is marching toward a hike. The question is, ‘Is it a long or a short march?” said Quincy Crosby, market strategist at Prudential Financial in Newark, New Jersey.

The KBW bank index (Philadelphia:^BKX – News) rose 1.3 percent as the Fed said its increase in the discount rate reflected improved financial market conditions that warrant less of a helping hand from the U.S. central bank. [Read the full article]

Stocks that moved substantially or traded heavily Friday on the New York Stock Exchange and Nasdaq Stock Market:

The Wall Street Journal reported Schlumberger Ltd. is in advanced talks to acquire the Houston oil services company.

The department store chain posted fourth-quarter profit that surpassed its expectations and issued and upbeat forecast for 2010.

Chairman and CEO Steve Creamer has resigned and will be succeeded as CEO by the nuclear services company’s president.

The chemicals maker posted a steep drop in profit versus year-ago results that were inflated by a hefty gain, but its revenue edged up.

The broadcasting companys net profit slid as an improvement in the advertising market was offset by a big drop in political spending.

Dell said its net income fell in the last quarter despite early signs that businesses may be starting to buy new computers again. [Read the full article]

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