Major averages open mixed. US stocks are trying to build on Monday’s solid performance in which the major indexes hit all-time highs. Market participants are reacting positively to COVID-19 treatment and vaccine progress, while the United States and China reaffirmed their commitment to the phase-one trade deal. With the exception of Hong Kong and China, Asian markets finished higher. European markets were in the green during midday trading.
How long does it take rates to start rising after the start of a recession? Over the last seven recessions, it’s actually taken an average of two years after the recession started before the 10-year Treasury yield made an initial move higher (Source: Federal Reserve). While the economy will be growing at below potential for a while, compression has been a theme of this recession, and we expect some limited interest rate pressure earlier than we’ve seen historically. For more on interest rates after a recession, see today’s LPL Research blog.
Technical update. The S&P 500 Index set another all-time high Monday, propelled by the strength in the relative laggard value sectors of financials and energy. While markets may appear stretched in the short term, we continue to emphasize the positive development of fresh highs and the resurgence of cyclical sectors. With the Dow Jones Transportation Average on the cusp of new 52-week highs, it’s difficult to interpret these market signals as defensive behavior.
COVID-19 news. New cases in the United States continued to fall on Monday, dropping 7.2% week over week to two-month daily lows near 35,000 and leaving the decline in the seven-day average at 17%. Hospitalizations fell 11.1% compared with the prior week, consistent with recent trends (source: COVID Tracking Project). Spanish Prime Minister Pedro Sanchez rejected calls for a national lockdown. Moderna said it is near a deal to supply at least 80 million vaccine doses to the European Union.
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