Major averages opened mixed. US markets opened mixed after record closes for the S&P 500 Index and the Nasdaq. Tuesday’s Dow Jones Industrials decline is credited to component changes to the index scheduled for month’s end. Market participants appear optimistic concerning COVID-19 vaccine progress along with US-China trade talks. Investors await Federal Reserve (Fed) Chairman Jerome Powell’s speech on Thursday along with claims numbers. Asian markets finished mixed, with European markets trading higher through midday.
Economic roundup. In the early stages of the recovery, we have received a mix of positive and negative economic data. This week was no different, with a massive surge in new home sales of 901,000, the highest level since December 2006, beating Bloomberg consensus estimates of 790,000 (Source: US Census Bureau). However, we’ll have to take the good with the bad, as the Conference Board’s Consumer Confidence Index fell to 84.8 from 81.7, likely capturing the rise in COVID-19 cases and hospitalizations last month, as well as the expiration of enhanced unemployment benefits on July 31. We continue to see modest improvement in the balance of economic data, but we emphasize that a return to normalcy will not be immediate.
What happens if Biden wins? LPL Research strategists discuss possible economic and market impacts if former Vice President Joe Biden wins the presidency. They also talk about the S&P 500’s new highs and what keeps them awake at night—and more Volvo issues. Market Signals “What May Happen If Biden Wins?” is available now as a podcast and video.
What will the bull do now? This bull market is about five months old, and it’s been one of the best starts to a bull market ever. In fact, comparing it with the first year of all the other bull markets since WWII, it has been the strongest up to this point. The previous two strongest up to this point were 1982 and 2009, which both saw continued gains over the next seven months. We take a look at this interesting development later today on the LPL Research blog.
Technical update. The S&P 500 and the Nasdaq Composite posted new all-time highs again yesterday, as leadership from tech and growth stocks continue to drive markets despite occasional pockets of strength from cyclical value. Elsewhere, the bond proxies of consumer staples and utilities continue to offer no relative advantage despite low bond yields. As August draws to a close, seasonality presents a challenge for markets as historical data dating back to 1950 reveals an average return of -0.4% for the S&P 500 for the month of September.
COVID-19 news. New cases in the United States fell 13.8% over the past week, while the seven-day average number of new cases has fallen 37.3% from the July 22 high near 70,000 (source: COVID Tracking Project). The downward trend in hospitalizations has continued nationally, including in Texas, which is 47% below its late-July peak. However, several states are still seeing rising hospitalizations, including Alaska, Hawaii, Montana, and West Virginia.
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