Dow slumps as Wall Street's 'fear gauge' hits 6-month high

US Equities (^GSPC, ^DJI, ^IXIC) are trading lower on Monday afternoon, with the Dow Jones down 200 points after reaching a high of 400 points earlier in the day. The market has reacted defensively to further escalation in the Middle East and broader market volatility.

Yahoo Finance Reporter Josh Schafer joins Market Domination Overtime to discuss Monday's top market takeaways.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Nicholas Jacobino

Video transcript

JOSH LIPTON: A wild day for investors on Wall Street. The Dow sliding 200 points on the day. That's after being up 400 points at the high earlier in today's trade. Joining us now for the day's trading takeaways, Josh Schafer is here with the latest.

JOSH SCHAFER: Yeah, Josh. Julie was just pointing it out, but I think we saw a clear trend today that markets are going to care as we get more headlines on potential escalation of the geopolitical conflicts we're seeing in the Middle East. You could see exactly where Julie was circling on some of those S&P 500 intraday charts, the Dow intraday charts. That's where we started heading lower. That seemed to be what investors were watching today.

It was actually interesting because it seemed like coming out of the weekend, when we, of course, had a lot of headlines, that stocks were OK with it, right, and the market was generally OK with sort of where things landed. Then throughout the day, as we learned more about what could be developing and potentially more conflict, right, it seemed that all of a sudden we cared a little bit more because it seemed like the conflict could get worse.

But it was just interesting, I thought, because I sort of expected to wake up today and maybe see futures down after the weekend, and we didn't quite get that. So it seems like maybe we're getting to a point where we're a little bit more uncomfortable.

JULIE HYMAN: Well, it's also interesting because we didn't even see stocks start to take a hit after the retail sales report and the surge in yields. I mean, yields were up 12, 13 basis points for most of the day.

JOSH SCHAFER: At, like, 8:30.

JULIE HYMAN: Yeah.

JOSH SCHAFER: Yeah.

JULIE HYMAN: And it didn't seem to hit stocks until we then got that Israel headline. It was almost like there was a sort of delicacy of the rally that then crumbled once we got that headline, which just shows, like, the underlying volatility, which I know is one of your takeaways from today, Josh.

JOSH SCHAFER: Yeah. It just seems like people are looking-- we've been talking about this for a while now, but looking for maybe some reason to take some risk off the table here. And maybe it's more about that than it is about sort of what the actual meat is within the conflict that we're seeing, I think, because I've been listening to the strategist you guys have had on this afternoon, people that were speaking on our show in the morning, and it doesn't seem like we're at a point yet in this conflict where people are specifically concerned necessarily about the conflict itself and sort of the escalation.

It seems a little bit more maybe investors have been looking for a reason to sell in the start of a conflict. Could be that. But yes, clearly, I did want to talk about volatility because I know we talked about the VIX a couple of weeks ago, and you were not satisfied with the move higher.

JULIE HYMAN: I was not impressed.

JOSH SCHAFER: Today, we hit a six-month high in the VIX. It's above 19-- I think it's above 19 now, which is about the historical average. So we're increasing rather significantly, but I do give you, it is not that high. So I guess I do care.

JOSH LIPTON: Yeah. Get the Julie Hyman take.

JULIE HYMAN: We'll see how long it-- I mean, by definition, usually, you get a shock to volatility. It hits that and then sort of comes back down. But we'll see what happens. I don't know.

JOSH LIPTON: We were talking to Tom Sosnoff on Friday, and he did think-- like, listen, the move in the VIX, Sosnoff was like, you pay attention to a move like that.

JOSH SCHAFER: Well, because one takeaway that I had looking at the VIX chart at least over the last six months and the S&P 500 you're looking at it here, we just haven't really had any volatility within that volatility measure, right? And I think that's maybe the feature to take away from the last six months of the rally, is it's not like we've been fighting something like the VIX on the way up.

So it sort of makes sense that as it does start to at least come back-- I mean, it's been asleep for six months, so it makes sense that people are starting to take some level of note of it because it basically has been a nonfactor. So it's, I guess, maybe one of the things that we can put in the several other worries that are starting to build here, like, maybe was the retail sales print too hot? I don't know.

JULIE HYMAN: But I guess one of the worries was not that consumers aren't spending.

JOSH SCHAFER: Right. I mean, I don't know, I often come on here, and I'm in the good-economic-news-is-good-news camp, and I'm not really planning to leave that camp. But I think that was one of the takeaways, would be, well, if we're going to have higher rates for longer, I think people would be more concerned if retail sales just fell off a cliff than if they continue to come in hot, not necessarily shockingly hot, though.

I mean, if you look within the print, it's not like you had a crazy amount of breadth there in spending. A lot of people bought stuff online, and it gave you a big increase in retail sales. It wasn't a massive report where everything is going up, and you're wondering what's going on. So it will be interesting to see how we continue to react to these reports right now because I think we're still in a phase where economists want to see the consumer doing well.

Especially when we're thinking about having more restrictive policy for a longer period of time, you want that consumer to hold up. If the consumer doesn't hold up, all these stocks that people own in that overall economy, they're not going to be buying things. And that's not going to be good.

JULIE HYMAN: Right.