US Stock Market Overview – Stocks Slide but Rise for the Week as Volatility DropsBrexit could generate volatility
US stocks were on the defensive led lower by a drop in Boeing shares which tumbled following news that Boeing withheld sensitive information about the 737 Max. Stocks had a difficult time gaining traction all weak as softer than expected retail sales and a drop in housing starts weighed on equities. The Wall Street Journal reported that Larry Kudlow the President head of the Economic Council convened a meeting telling President Trump that an escalation of trade issues with the Chinese could push the US economy into a recession. Sectors in the S&P 500 index were mixed, led down by technology, real-estate was the best performing sector.
The VIX Rebounds
The VIX volatility index finished the week in the red despite a rebound on Friday. VIX has dropped 33% in October dropping from 21% at the beginning of the month to 14%. The low level of volatility appears to have priced in a Brexit, weak economic data and the potential disruption from President Trump on trade issues.
Boeing Shares Tumble
Boeing shares dropped more than 6% on Friday as the Federal Aviation Administration said Boeing withheld messages from 2016 between employees about a flight-control system implicated in two crashes of the 737 Max. A Boeing test pilot complained in one of the messages that a flight control system, known as MCAS, was difficult to control. That system is at the heart of investigations into two fatal crashes.
Kudlow Warns of Headwinds Created by Tariffs
President Trump’s top economic adviser, Larry Kudlow last week arranged an Oval Office briefing with outside experts. The goal was to warn the president that continued the escalation of U.S.-China trade tensions could imperil the economy. The meeting came days ahead of trade talks between senior U.S. and Chinese officials.
Imports From Europe will Climb
On Friday, new tariffs on 7.5 billion in European imports were set to go into effect. Unlike most other US trade action, these tariffs were sanctioned by the WTO. Europe has threatened to retaliate, which risks an escalation of the conflict.
Brexit Generates Volatility
With the UK-EU Brexit agreement, will now be settled by the UK Parliament, which will consider the plan over the weekend. Getting the deal over the finish line will be difficult. This could generate a harder Brexit than previous brought to the parliament. The deal would take away the potential for a new customs union.