U.S. stocks traded within a narrower range on Feb. 7 and closed flat, as the Senate struck a budget deal and concerns about rising inflation faded.
The S&P 500 Index closed down 0.50% at 2681.63, and the Nasdaq Composite Index was down 0.90% at 7051.98 on Feb. 7 as volatility eased. The Chicago Board Options Exchange Volatility Index, or VIX, dropped 22% to 23. The VIX, which popularly is said to measure fear in the market, had topped 45 on Feb. 6 as stock prices moved widely.
Investors' return to the stock markets pushed bond yields higher. The yield on the benchmark 10-year U.S. Treasury notes was up 40 basis points to 2.844%.
Market participants also got welcome news from Washington when Senate leaders said they had reached a bipartisan, two-year budget deal. If approved by both houses of Congress and signed by President Donald Trump, the deal would prevent the last-minute standoffs over potential government shutdowns.
Equity markets had fallen sharply in recent days as fears of inflation and rate hikes led to a global selloff.
Earlier on Feb. 7 William Dudley, the President of the New York Federal Reserve, said that while recent volatility wasn't enough to be "a big story for central bankers," his views on how much the Fed should raise rates this year could be affected if markets were to go into a prolonged slump. The Fed is widely expected to raise rates at least three more times in 2018.
European markets closed higher after key Asian markets reversed early-trade gains to end Feb. 7 lower.
The FTSE 100 gained 1.93% to close at 7279.42. Germany's DAX gained 1.60%, and France's CAC 40 climbed 1.82%. The Euronext 100 was up 2.0%.
Asian markets posted strong gains in early trade but China and Hong Kong stocks fell to end the day in the red Feb. 7 after U.S. stocks staged a rebound Feb. 6.
China's Shanghai Composite Index closed 1.82% lower at 3,309.26, continuing its losing streak after posting its largest single-day decline in two years Feb. 6. Hong Kong's Hang Seng Index was down 0.89% to close at 30,323.20 on Feb. 7. It shed 5.02% the previous day.
However, Japan's Nikkei 225 Index closed 0.16% higher at 21,645.37. The index recovered from its 4.73% drop Feb. 6.
