Markets Continuing Run Higher. US stocks opened higher after another solid performance and round of new highs Tuesday. Growth once again outperformed value, but the story of the day was an upside surprise in August US manufacturing numbers (more below). Today is a quiet news day, with many looking ahead to the monthly jobs report on Friday as the next major driver. Asian markets finished mixed but mostly higher, with European markets up significantly during midday trading.
Improving manufacturing data. The August Institute for Supply Management (ISM) manufacturing index increased to 56.0, above the consensus of 54.5 and at its highest level since November 2018. Above 50 is expansionary, and August was the third consecutive month above 50. New orders were up to 67.6, the highest level since January 2004, while 9 of the 11 components also expanded. Improving manufacturing is a global theme, as yesterday’s China Caixin Manufacturing Purchasing Managers’ Index (PMI) came in at a nine-year high.
Up 5 months in a row. The S&P 500 Index has finished green five consecutive months, the longest monthly win streak since six in a row in 2018. Here’s the catch: Since 1950, the S&P 500 has had 26 other five-month win streaks—and a year later it was higher 25 times. Additionally, when it was higher the five months from April through August—the median gain the rest of the calendar year was a very impressive 9.8%. We discuss this and more later today on the LPL Research blog.
Technical update. US indexes rallied to solid gains in the final hour of trading Tuesday, with the Nasdaq once again leading the way with a 1.4% advance. Despite technology stock gains, materials was the best performing sector as the US dollar traded to more than two-year lows. Stocks are higher in early trading today. First support for the S&P 500 can be found at 3393, while the first upside level to watch is 3677, about 4% above Tuesday’s close.
COVID-19 news. New daily US cases jumped 16.7% on Tuesday versus the prior week, the biggest increase since mid-July. This lifted the change in the seven-day average to 0.6%, up from the 3% drop reported Tuesday (source: COVID Tracking Project). Hospitalizations fell 8.2% week over week and continued to steadily decline. Roche plans to launch a rapid COVID-19 test. The Centers for Disease Control (CDC) issued a nationwide order to halt residential evictions through year-end.
LPL Research in the Media
LPL Research Chief Market Strategist Ryan Detrick joined On The Move with Yahoo! Finance recently to discuss the role of stock splits, the economy, and bull market. Watch the full interview here.
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