S&P 500 opens near flat following Monday rally. The MSCI Asia Pacific Index climbed overnight, although China’s markets were closed for a holiday. Most major European indexes are showing modest gains midday. Federal Reserve Chair Jerome Powell will speak on the state of the US economy in a speech before the National Association of Business Economics (NABE) this morning.
US stocks gain to start week. The S&P 500 Index rose 1.8% to start the week Monday as President Donald Trump’s improving health and some buzz around stimulus prospects lowered the perception of political risk. Technology showed strength but energy led, and the 10-year Treasury yield edged higher. Equity gains were broad-based, with growth stocks outpacing value and small caps topping large.
Service sector growth surprises to upside. The Institute for Supply Management’s services purchasing managers’ index (PMI) topped economists’ consensus expectations (source: Bloomberg), signaling improvement in the area of the economy hit hardest by COVID-19-related shutdowns. The index hit 57.8 in September, versus expectations of 56.9, with particular strength in new orders.
Risk-on quarter for fixed income. Third quarter was a strong quarter for fixed income investors, as improving economic conditions provided a tailwind for “risk on” sectors of the market. High yield, bank loans, and emerging market debt investors saw solid gains as the economy began to price in the gradual return to normalcy. However, many of these sectors are still playing catch-up. We review third quarter fixed income market performance later today on the LPL Research blog.
Technical update. The S&P 500 is near flat in early trading, after a broad-based advance pushed the index up 1.8% on Monday. Advancers on the NYSE outnumbered decliners by more than 4:1, and the Russell 2000 led major indexes with a 2.8% gain. The yield on the 10-year Treasury has also broken out in recent days, touching its highest level in more than a month.
COVID-19 news. New cases in the United States rose 4.5% week over week on Monday, but the seven-day average stayed roughly flat near 43,500 (source: COVID Tracking Project). Hospitalizations rose 22.4% week over week, pushing the seven-day average change from 7% on Sunday to 9% Monday. Recent stability in cases suggests hospitalizations may soon crest. Germany’s new cases jumped the most since mid-April, while Italy is set to order stricter measures. India, one of the biggest global hotspots, reported its lowest number of infections in more than a month.
LPL Research in the Media
LPL Research Chief Market Strategist Ryan Detrick discussed stock market performance on USA Today.
LPL Research Equity Strategist Jeff Buchbinder was quoted on jobs growth on CNBC.
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