A television station broadcasts the Federal Reserve’s interest-rate cut on the ground of the Latest York Stock Exchange (NYSE) in Latest York, US, on Wednesday, Dec. 18, 2024.

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Wall Street’s fear gauge — the VIX — spiked by the second biggest percentage in its history on Wednesday, after the Federal Reserve jolted the stock market by saying it might dial back its rate-cutting campaign.

The CBOE Volatility Index surged 74% to shut at 27.62, up from around 15 earlier within the day. That surge is the second-greatest in history, behind a 115% leap to above the 37 handle back in February 2018 when there was a blow-up in funds tracking the volatility index.

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Wednesday’s move comes after the central bank said it’s going to likely lower rates of interest just twice next yr, down from the 4 cuts it projected back in September, alarming investors who wanted low rates to maintain fueling the bull market. The Dow Jones Industrial Average tumbled by 1,100 points to its tenth straight loss.

Typically, a worth greater than 20 within the VIX indicates a better level of fear available in the market. Nonetheless, for many of this yr, the VIX had been suppressed below that level, worrying investors who believed the market had gotten overly complacent.

The VIX is calculated based on the costs of put and call options on the S&P 500. A spike could indicate a rush by investors to buy put options for defense in a decline.

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CBOE Volatility Index, 5 days

Still, there have been one other significant surge within the VIX in 2024. The third-biggest surge within the VIX in history occurred in Aug. 5, 2024, when fears of a U.S. recession, and a significant unwind within the yen carry trade, spurred a roughly 65% increase within the VIX to shut above 38. On an intraday basis, the VIX briefly topped 65 that day.

On Thursday, the VIX was last floating just above the 20 handle, down greater than 25% from the prior day.