S&P 500 extends sell-off. Despite a strong rally in the final hour of trading, the S&P 500 Index extended its recent sell-off to open the week. As of Monday’s close, the index is now a little over 8% off its September 2 all-time high. Lack of progress on stimulus talks, a global rise in COVID-19 cases, and potential increased election jitters have been among the catalysts for the sell-off.
Asian stocks falter, but Europe rebounds. Most major Asian indexes followed US stocks lower overnight, with Japan’s markets closed for a holiday. European shares are showing more resilience at midday. The S&P 500 was near flat at open with the Nasdaq 100 showing more strength as technology-oriented stocks, the driver of Monday’s late rally, potentially look to lead the market higher.
Falling rates provide broad bond market support. While our base case is for interest rates to push gradually higher, bonds also are about playing defense. Interest rates fell in five of six major stock declines last cycle, but Treasuries led as widening credit spreads hurt economically sensitive bond sectors. In a falling-rate environment when equities rose, however, most bond sectors benefited. For more on how different bond sectors performed when rates fell last cycle, see today’s LPL Research blog.
100 and counting. The S&P 500 sell-off and US dollar may be signaling an election winner, while the Fed signals for more stimulus. LPL Research strategists discuss all this and more in the 100th edition of Market Signals, 100 Market Signals and Counting.
Technical update. Markets sold off to begin the week, with the S&P 500 falling 1.2% on Monday. The index closed at 3281 and is nearing next technical support at 3200. While selling thus far in September has been largely concentrated in the technology and large cap growth corners of the market, Monday saw decliners on the NYSE outnumber advancers by 7:1, the worst since late June.
COVID-19 news. New cases in the United States jumped 30% week over week Monday, pushing the seven-day average up to 41,689, the highest since August 24 and 20% above the prior week (source: COVID Tracking Project). Hospitalizations are more than 60% below their August highs despite rising 14% since September 8. United Kingdom Prime Minister Boris Johnson told the British to work from home. The Centers for Disease Control (CDC) pulled its guidance that airborne particles could linger in the air and travel more than six feet.
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