US S&P 500 continues to nudge toward all-time high. The broad MSCI Asia Pacific Index climbed 0.4% overnight, although Japan lost ground. The Stoxx Europe 600 is showing similar gains at midday as the S&P 500 Index edges closer to its all-time high close, set February 19, 2020. An all-time high would be the final confirmation of the end of the COVID-19 bear market and another milestone in the rally off the March 23 lows.
Inflation is back, but just back to normal. The 10-year US Treasury yield has hardly moved during the strong equity rally, although there are increasing signs that bond investors may expect inflation to normalize. A weak Treasury auction last week, strong gold prices, and rising Treasury-implied breakeven inflation rates all signal that disinflation fears have subsided. Inflation remains elusive, however, and markets may simply be pointing to inflation levels returning to normal. For more on yields and inflation, read today’s LPL Research blog.
Technical update. The S&P 500 failed to close above its all-time high at 3386 again, despite intraday trading above that level, suggesting that the February highs are forming a level of resistance. So far, price has consolidated rather than faced an outright pullback. Financials continue to drag on performance, declining more than 1.5% as rates have pulled back following a brief surge last week. Meanwhile, the Nasdaq Composite and Russell 2000 Growth Index tallied fresh all-time highs, propelled by a surge in the technology sector.
COVID-19 news. On Monday new US cases fell 9.2% compared to the prior week, while the seven-day average fell 2.8% over the past week. The seven-day average has fallen every day since July 25 (source: COVID Tracking Project). Hospitalizations fell 10.5% week over week based on seven-day averages, the sixth straight day with a 10–11% decline. Bloomberg reported Germany had its highest number of new cases in four months. Republicans plan to introduce a “skinny” COVID-19 relief bill.
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