April 28 (Bloomberg) -- The U.S. stock market’s fear gaugeprobably will settle down in the next few days after its biggestone-day surge since October 2008, according to Bill Luby, editorof the VIX and More newsletter and blog.

The CHART OF THE DAY displays daily percentage changes inthe indicator -- the Chicago Board Options Exchange VolatilityIndex, also known as the VIX -- during the past 18 months.

The VIX climbed 31 percent yesterday as Standard & Poor’slowered Greece’s debt ratings to junk-bond status and downgradedPortugal, heightening concern that European government deficitswill spark a global financial crisis. This was only the eighthincrease of 30 percent or more since the CBOE introduced thegauge in 1993, according to data compiled by Bloomberg.

Yet the index’s closing level of 22.8 “is not the kind ofnumber that suggests panic is in the air,” Luby wrote yesterdayon his blog.

Europe’s deficit burden is “a less significant structuralrisk, at least for now,” to the financial system than theevents behind previous jumps in the VIX, he wrote. He cited thecredit crunch in 2008, the Sept. 11 terrorist attacks in 2001and the Asian financial crisis in 1997.

A drop within the next week would be in keeping with theVIX’s past performance, Luby’s posting said. The index has lostan average of 7 percent in the first three days after single-daygains of at least 20 percent, according to his calculations. Theaverage five-day decline has been 9 percent.

(To save a copy of the chart, click here.)

To contact the reporter on this story:David Wilson in New York at [email protected]