US Stock Market Overview: Stock Surge on Trade News, Led by Energy Shares

US stocks surged on Thursday as sentiment improved following news that trade negotiations between the US and China might proceed. All sectors were higher on Thursday, led by energy shares which were buoyed as Hurricane Dorian moved over the Caribbean. US yields moved higher, despite a softer than expected US Pending home sales report. The VIX volatility index, dropped more than 7% as stock prices moved higher, falling back below the 18% level.

VIX Moves Lower

The VIX, which measures the implied volatility on the “at the money” strike prices for the S&P 500 index, moved lower on Thursday as stock prices gained traction. The VIX hit a high of 24.8% in early August but has been unable to return to that level since, despite continued geopolitical risks. Implied volatility is used as a gauge to determine the cost of options portfolio protection.

Trade Negotiations between the US and China Could Resume

A spokesman for China’s Commerce Ministry said that the US needs to create the necessary conditions for trade negotiations to proceed. He also said that both countries remain in communication over possible talks in September. China hopes to prioritize discussions over removing the latest tariffs announced by President Trump last week to prevent a further escalation of the trade war.

Energy Prices Rally on Hurricane Fears

Energy shares surged higher as both crude oil and natural gas prices rallied as investors braced for the impact of Hurricane Dorian. The hurricane is closing in on Puerto Rico and is currently rated a category 1, storm with sustainable winds of 75-miles an hour. The storm is expected to increase in strength and could hit the east coast of Florida as a category 4, storm. The hurricane is expected to move over Florida and enter the Gulf of Mexico. Twenty six counties in Florida are now under a state of emergency.

Pending Home Sales Fall

Homes that will go to contract declined in July. The National Association of Realtors reported that its pending home sales index fell 2.5% to 105.6 in July. The index has slipped 0.3% from a year ago. With trade tensions and fears of a possible recession intensifying, a robust job market hasn’t been enough to strengthen sales. Sales have also been hampered by the lack of available homes on the market, which has contributed to home prices climbing faster than incomes. The long-standing shortage of sales listings and persistently high prices have blunted the benefits of lower mortgage rates nearing all-time lows.