Yahoo Finance US Stock Market Overview – Stocks Whipsaw Following Trump Threatening Tweets
US stock prices tumbled on the open, as traders headed for the exits following Trump’s tweet on Chinese tariffs. The market was spooked but over the session, it gained traction. Chinese stocks were hammered on Monday with the Shanghai down 5.5%. The Fed semi-annual survey showed that the central bank believes asset values are elevated.
Volatility Surges on the Open
Th VIX volatility index surged on the open, as fear permiated through the markets. Riskier assets declined and safe haven assets surged. After hitting 19%, the highest level that has been seen since January, the VIX moved lower falling down below the 200-day moving average at 16.55. The VIX measures the “at the money” implied volatility on the S&P 500 index. When the VIX rises the premiums on options that are used to protect against an adverse move in the S&P 500 index rise.
Most sectors were lower, led down by the Industrials and Materials which likely have exposure to China. Healthcare bucked the trend. Small cap stocks, such as the ones in the Russel 2000, outperformed as most likely have little exposure to China.
Anadarko was one of the best performers in the S&P 500. Ahead of the opening bell, CNBC interviewed by Warren Buffet and Charlie Munger. They said they were very interested in Anadarko, and believe that the company is undervalued. They decided to go with Occidental Petroleum as opposed to purchasing Anadarko themselves, as they said they wanted a partner who knows the business thorrowly.
The Fed Survey Reflects Certain Rises
The Federal Reserve released its asset evaluations saying that banks are well capitalized but equity assets are elevated. They said that the European markets provide risks for the US markets. Fed says the standard for US loans is deteriorating
Trump Threatens to Increase Tariffs
President Donald Trump over the weekend, released a threat to the Chinese government saying that tariffs woud increase tariffs on $200 billion of imports from China from 10% to 25% this Friday if Chinese continued to backtrack on some agreements. This caught market participants completely off guard, providing the back drop for a risk off trade and a rush to safe haven assets like gold. A Chinese delegation is still on its way to the US but the lead negotiator is not coming. Trump also threatened to extend that 25% duty on another $325 billion of Chinese goods. The president is unhappy with the progress of the talks and wanted to attempt to move the ball forward with additional treats. Many perceive that the strong US economy provides leverage, but the Chinese leader does not have elections, which would eventually put pressure on Trump to yield.
This article was originally posted on FX Empire
