US Stock Market Overview – Stocks Tumble As Fears Push VIX to 2-year HighsThe Dow Drops Nearly 1,200 points
US stocks traded under pressure for a 7th consecutive trading session. The S&P 500 index officially hit correction territory. Yields moved lower, volatility continued to rise, as investors struggled to determine where the market will bottom.
While many analysts are talking about whether the Fed will lower rates, the Fed is trying to focus on credit and slower growth. A correction in stock prices is normal, but if prices move quickly into a bear-market territory (the S&P 500 index down 20% from its highs), the Fed will likely be quick to make a move. The data the market is seeing for February is not that bad. The issue is that the stock market is forward-looking and the slowness will probably not occur until April. The market is currently pricing in 3-reductions in Fed fund rates in 2020, with a better tan 50% chance in April.
The VIX volatility index continued to surge on Thursday, rising above 36% at the highs of the session. While the VIX hit a high of 50% in February of 2018, this is likely to be the highest weekly close on the VIX in the past 3-years. Housing data continued to impress as US treasury yields decline. The 10-year Treasury yield hit a low of 1.29 on Thursday, which weighed on mortgage yields making home buying more attractive. Gold prices continue to rise as Treasury yields held south, somewhat buoying metal mining companies.
The Housing Market is Surge
Declining treasury yields are weighing on mortgage rates, providing lower costs to purchase homes. The National Association of Realtors, reported that Pending Home sales surged 5.2% on January, up 5.7% year over year. Pending sales measure signed contracts, not closings.