US Stock Market Overview – Stocks Slide as VIX Rallies Ahead of Tariff Decision

US stocks moved lower on Monday, reversing some of the robust gains seen on Friday following the better than expected jobs number. Most sectors were lower, led down by Healthcare. Consumer staple and Real-estate were the best performing sectors in the S&P 500 index. US yields edged slightly lower after rising on Friday. The VIX volatility index, surged more than 16% on Monday, closing the session at 15.86%. Defensive stocks are likely to benefit from additional market volatility. Growth is expected to rise in the Q4 according to the latest model from the Atlanta Fed.

VIX Surges

The VIX reflects the implied volatility of the “at the money” strike prices of the S&P 500 index. When the VIX begins to percolate, it generally means that fear is creeping back into the market. Last December stocks tumbled allowing the VIX to surge. The VIX hit a 2019 low at 11.44 on November 27, and has climbed nearly 40% since that date. With concerns over a stall in trade talks, and near tariffs expected to kick in on December 15, the markets are leery of additional volatility.

Fed Models Diverge

The NY and Atlanta Fed models are diverging in the wake of last Friday’s stronger than expected jobs data. The Atlanta Fed’s model is showing that the US economy is doing better than anticipated in Q4.  The Atlanta Fed’s GDPNow model currently estimates Q4 GDP growth at 2.0% up from 1.5% previously.  This compares to its low for Q4 of 0.3% back on November 15.  The NY Fed’s Nowcast model now has Q4 growth at 0.58% down from 0.77% previously.  It also cut its estimate for Q1 growth to 0.66% from 0.98% previously.  While there appears to be a divergence with the two models, what is clear is that growth is far from negative and a recession.