US Stock Market Overview – Stock Surge on “Phase 1”, Trade Deal Announcement

US stock prices surged on Friday as markets continued to hear rumblings about a trade deal between the US and China. President Trump met with Chinese negotiators and announced a substantial phase 1 deal which would pare back some of the tariffs on China. Secretary Mnuchin announced that there would be no tariff increase on October 15, which was more than the markets expected. The markets wanted to see that there was progress. All sectors on the S&P 500 index were higher led by Materials and Industrials, Utilities were the worst-performing sector.

The President announced a substantial phase 1, deal and said that once the deal was written the two parties would begin to work on phase 2. Sectors that have exposure to China were the best performers on the S&P 500 index. The VIX volatility index, which measures implied volatility on the S&P 500 index, tumbled 11% as sentiment improved. Import prices came in higher than expected on Friday and consumer sentiment rose.

Import Prices Rose

Import prices in the US rose in September according to the Labor Department. Import prices increased by 0.2% last month. Expectations were for import prices to remain flat month over month. The import data that was released in August was revised to import prices declined by 0.2% instead of the 0.5% decline previously reported. Oil prices increased by 2.3% buoyed import prices. On a year over year basis import prices decreased 1.6%.

Consumer Sentiment Rose

The University of Michigan reported that consumer sentiment rose to a three-month high of 96 this month from 93.2 in September. Expectations had been for consumer sentiment to climb to a level of 92.5. This comes despite a choppy stock market, and trade tariffs that continue to weigh on global economic growth.

The Fed will By Treasury Bills Through Next Year

The Federal Reserve reported that the central bank would buy short-term Treasury debt beginning next week. The Fed will buy Treasury bills at an initial pace of $60 billion a month and continue those purchases into the second quarter of 2020. The Fed said the actions were technical in nature and were not as a way to address monetary policy.