US Stock Market Overview – Stocks Rally, but Ease into the Close Dragged Down by Energy

US stocks moved higher on Monday but closed off the highs of the session. There was a wave of selling in the last hour which weighed on the financial. Strong gains in oil prices initially lifted energy shares, but the sector eased into the close. A stronger than expected ISM services report showed the first contraction in services-oriented economic activity since the great recession.

Airline stocks continued to fall following this weekend’s commentary from Warren Buffet about selling his shares in these companies. US Household debt surged higher reaching the highest levels on record. Sectors in the S&P 500 index mixed driven higher by healthcare and technology. The energy space was the worst-performing sector in the S&P 500 index. The VIX volatility index dropped more than 7%, declining back to 33%. The lows in April were 30% which is likely strong support.

US ISM Services Tumbles

The U.S. services sector contracted for the first time since the great recession, according to the Institute for Supply Management. The ISM nonmanufacturing index dropped to 41.8 in April from 52.5 in March, showing the first contraction in services since December 2009. It was also the biggest contraction for the sector since March 2009.

US Household Debt Surges

The US is borrowing at record levels, especially at  the consumer level. The New York Federal Reserve reported on Tuesday that household debt March totaled $14.3 trillion, a 1.1% increase from the previous quarter far surpassing the prior cyclical high of $12.7 trillion in the third quarter of 2008. Credit card balances fell $34 billion. Mortgage balances rose $156 billion to $9.71 trillion.

Norwegian Cruise Line Shares Drop Sharply

Share of Norwegian Cruise dropped more than 21% on Tuesday as the company warned that it may have to seek bankruptcy protection. In a statement, the company said that there’s “substantial doubt” about its ability to continue as the coronavirus pandemic destroys the industry. The demand for cruises has fallen sharply and the business model of cramming as many individuals on a boat may need to be recalibrated.