US Stock Market Overview – Stocks Rebound Led by Energy, Utilities Lag

Trade tensions continue to buoy volatility
David Becker

US stock prices rebounded on Tuesday, after tumbling on Monday following continued volatility from the US/China trade dispute.  Both the Dow Industrials and the S&P 500 index rose by approximately 0.8%, while the Nasdaq outperformed rising 1.14%. The Dow Jones Industrials posted its best day in a month. Most sectors in the S&P 500 index were higher, led by a 1.89% rise in Energy, Utilities bucked the trend and were the only sector that was down on the day. Utilities were the best performing sector over the past week.

The VIX volatilty index, which measures the implied volatility of the  “at the money” strike prices for the S&P 500 index, moved back below the 20% level, dropping down to 18.2% on Tuesday. The VIX is still elevated, and the rebound on Tuesday was likely a reboud that will continue to see whipsaw price action.

The Trade Despute Continues to Drive Prices Action

The trade dispute continued to Tuesday as China announced retaliatory measures, after which the USTR released a list of around $300 billion of Chinese goods that could be hit in the next round of tariffs.  China has now halting purchases of US agricultural goods.  With total reported holdings of $1.13 trillion as of February, selling US treasury securities will damage the Chinese portfolio.  The 10-year UST yields are now lower than they were when the China headlines hit. Remember, treasury yields move in the opposing direction of price. Yields would not be lower if the Chinese were selling their portfolio of US treasuries.

Disney and Comcast Annouce Deal

Walt Disney and Comcast Corp. struck a deal that turns operational control of Hulu over to Disney and gives Comcast the option to sell Disney its stake in the streaming-video service. The deal provides Comcast the option to require that Disney purchase 33% of its stake in its NBCUniversal subsidiary which owns in Hulu as early as January 2024. Disney has guaranteed that Hulu’s equity value at the time of a deal will be at least $27.5 billion, which would value Comcast’s stake at about $9 billion. The streaming service was valued at $15 billion just last month.

Fed Thinks Rates are at the Right Level

The Federal Reserve doesn’t need to cut interest rates to boost inflation, according to Kansas City Fed President Esther George. George said that low inflation is of little concern to anyone but financial market participants and economists who fear that the central bank is undershooting its 2 percent target and thus should ease policy to boost activity.

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