US Stock Market Overview – Stocks Drop and Volatility Surges More Nearly 14%

US stocks moved lower on Tuesday after a report that House Speak Nancy Pelosi would announce an Impeachment inquiry later in the day. This comes following a report that President Trump asked his acting chief of staff to place a hold in aid to Ukraine, a week before his July phone call with the new Ukrainian President. Press reports suggest that a US-Japan trade deal is stalling out. Most sectors were lower on Tuesday, led down by a route in energy shares, which dropped more than 2.5%. Utilities bucked the trend in a down tape.

Trump Held Aid Back from Ukraine

Stocks moved lower and volatility surge following a report that President Trump asked his acting chief of staff to place a hold on $391 million in aid to Ukraine more than a week before a July phone call. During the call, the President urged his Ukrainian counterpart to investigate Joe Biden ’s son, a revelation that comes as an investigation into the president’s dealings with Kiev is gaining traction on Capitol Hill.

The House and Senate had approved sending military aid to Ukraine to help the country defend against Russian aggression. Mr. Trump and his advisers, including then-national security adviser John Bolton and Defense Secretary Mark Esper, began discussing in June.

The VIX Surged Nearly 14%

The VIX volatility index, which measures the implied volatility of the “at the money” strike prices on the S&P 500 index, rallied 13.82%. The VIX recaptured resistance near the 200-day moving average at 16.66, closing at 16.97. Momentum on the VIX has also turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The rally in the VIX was exaggerated more than the decline in the S&P 500 which means that options investors are attempting to protect their gains and are willing to pay up for protection.

This is the first time that the Democrats have been able to mount enough support to move forward with an impeachment query. The surge in the VIX is a reflection of the unknown and how an impeachment query will play out.

The US-Japan Trade Deal is Stalling Out

There are reports that suggest that a US-Japan trade deal is stalling out.  Talks ended Tuesday and negotiations are reportedly at an impasse over the US threat to slap tariffs on Japanese autos.  Japan is asking for a sunset clause that ends any deal if the US imposes such tariffs.