Daily Insights
Stimulus, COVID-19 concerns send S&P 500 Index to worst day in a month. Weakness in travel and leisure stocks highlighted rising COVID-19 concerns. At the same time, there was little sign of a large rotation trade.
- Value stocks lagged growth, but small caps largely hung in with large.
- Treasury yields fell, but declines were not outsized.
- European markets are modestly lower in midday trading.
- Asian markets closed flat-to-lower overnight.
Back to fundamentals. The S&P 500 will look to rebound after Monday’s losses, and if it does, part of the story will be refocusing on earnings. Earnings have largely taken a backseat to the progress of stimulus talks and rising COVID-19 cases, but in the end earnings are the main driver of stock returns.
View the Q3 Earnings Season Dashboard https://lpl-research.com/hoc/quarterlyupdates.html
Senators leave DC, making pre-election stimulus less likely. Following the confirmation of Supreme Court Justice Amy Coney Barrett, the Senate began its pre-election recess. The Senate could return for a last-second deal, but Republican senators already have pushed back against the package being negotiated by House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin.
Municipal bond opportunities. With the potential for additional fiscal stimulus after election uncertainty passes, municipal bonds may present an opportunity to gain high-quality bond exposure relative to more expensive Treasuries. We take a look at some of the post-election scenarios for the municipal bond market in today’s LPL Research blog.
Technical update. Stocks saw broad-based selling to begin the week, with the S&P 500 Index losing 1.9% and the Dow Jones Industrial Average falling 2.3%. Internal data was the worst in more than a month, with decliners outnumbering advancers on the New York Stock Exchange. US equities are bouncing this morning, and the S&P 500 will try to reclaim the 3425 level.
COVID-19 news. The uptrend in US COVID-19 cases continued Monday as a 9% increase week over week pushed the seven-day average up 22% over the prior week to near 70,000 (source: COVID Tracking Project). Hospitalizations continue to trend higher but remain well short of spring highs. Germany may be headed for a light lockdown with restaurant closures and bans on big events. Eli Lilly scrapped trials of an antibody therapy on patients in advanced stages of treatment.
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