US Stock Market Overview – Shares Surge as PBOC Supports Yuan

US stocks continued to rebound on Thursday as China signaled that it would support a more stable currency. Riskier assets rallied as investors sold safe-haven assets. The VIX volatility index dropped, after testing the 25% level earlier in the week. Kraft-Heinz tumbled as it reported falling sales and wrote down the value of its brands again. All sectors were higher, driven by energy and technology, consumer staples were the worst performer in a strong tape. Yields were nearly unchanged on Thursday while the dollar eased slightly. Crude oil prices rebounded sharply rising 2.8% which led to the gains seen in the energy space.

The VIX Tumbled as Stocks Gained

The VIX volatility index tumbled on Thursday as stocks rose. The implied volatility index dropped more than 13% after surging as high at 25 earlier in the week. Seasonal weakness in the stock market may lead to choppy market conditions for the balance of the summer. The Dow Industrials bounced near the 200-day moving average, which put downward pressure on implied volatility.

Jobless Claims Dropped More than Expected

The Labor Department reported on Thursday that initial claims declined 8,000 to 209,000 for the week ended August 3. Data for the prior week was revised to show 2,000 more applications received than previously reported. Expectations were for claims to be unchanged at 215,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, edged up 250 to 212,250 last week.

Chinese Exports Rose

China reported a contracting trade surplus.  Exports increased by a stronger than expected 3.3% year over year, compared to expectations of a 1.3% decline.  Imports declined by 5.6% in July, less than the 7.4% drop in June and the 9% decline expected.  Exports to the US fell 6.5% year over year. China appears to be shifting its trade due to the US tariffs.  Exports to Europe rose 6.5% and 15.6% to other Asian countries. China reported that its reserves that moved lower in July to about $3.104 trillion from $3.119 trillion.

Kraft Heinz Tumbles

Kraft Heinz tumbled as the firm reported falling sales and wrote down the value of its brands again, reflecting operational missteps as well as the enormous pressure on food giants to improve their products as consumers gravitate to newer alternatives. The company said on Thursday that it had booked charges reducing the values of its assets by $1.22 billion for the first six months of its fiscal year. That included $744 million related to businesses including international divisions and its U.S. refrigerated foods unit, along with $474 million in declining value reflecting the company’s lower stock price.