Stimulus, vaccine optimism supporting gains in global stocks. Most major international indexes extended Monday’s US gains overnight as investors digest Europe’s approximately $850 billion fiscal stimulus package and continued positive news on vaccine progress. Tech-related stocks led yesterday’s rally amid narrow sector leadership gains after some high-profile names lagged last week. The S&P 500 Index is higher early this morning as we move into the heart of earnings season.
Falling real yields may be more optimistic than they appear. Real yields (yields excluding inflation) have been falling, to the benefit of Treasury Inflation-Protected Securities (TIPS) investors. Usually, falling real yields mean lower growth expectations, but in this case, with Treasury yields flat, it could mean normalizing inflation expectations and strong confidence central banks will remain supportive. For more on real yields and our view of TIPS, see today’s LPL Research blog.
COVID-19 news. Growth in cases slowed again Monday, as Johns Hopkins reported 56,800 new cases in the United States, down 4.2% over the past week on a 1.8% increase in tests. New York City has moved to the next phase of its reopening, while California reported slowing growth in hospitalizations. European Union leaders agreed to a 750 billion euro pandemic relief package.
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