US equities look to rebound from Monday’s selloff. The S&P 500 Index opened higher this morning after lack of progress on stimulus talks contributed to broad-based losses Monday. Investors may start looking ahead to a post-election stimulus package, but would welcome something sooner. Asian shares were mixed overnight, while the broad Stoxx Europe 600 sits near flat at midday.
Pre-election stimulus gets another push but looks elusive. It’s getting late in the game to pass a stimulus package before Election Day, but Speaker of the House Nancy Pelosi and Treasury Secretary Steve Mnuchin are giving it another go amid reports that differences are narrowing. Even if they were to reach an agreement, President Donald Trump would still need to corral Senate Republicans, who have resisted a large deal and are advocating for a more focused stimulus package.
Forward Treasury returns track yields. The 10-year Treasury yield, which has seen modest advances recently, ended the day with a yield of 0.77% on Monday. Historically, that’s been a pretty good forecast of 10-year Treasury returns over the next 10 years. While still a positive return, it’s a historically weak outlook for those who seek the safety of Treasuries. For more on the relationship between yields and returns and navigating the low-yield environment, see today’s LPL Research blog.
Economy is getting better. In Market Signals: Getting Better is Good Enough, LPL Research strategists discuss stocks’ continued seasonal volatility and signs the economy is improving, plus the strong start to earnings season and why small cap stocks are looking better. Market Signals podcasts are available on iTunes, GooglePlay, Spotify, LPL Research YouTube channel, and lpl.com.
Election 2020 update. An estimated 30 million people have voted as of October 17, according to the US Elections Project. With 15 days to go until Election Day, that’s more than six times the number of votes cast by the same point in 2016, and roughly 20% of the total votes cast during the 2016 election. With worries of long lines on Election Day creating safety issues during a global pandemic, it comes as no surprise that more Americans are leveraging the opportunity to cast their votes early. For more elections resources, visit our LPL Research Election 2020 Resources page on the Resource Center as well as client-approved election charts on the House of Charts — Elections 2020 tab.
Technical update. US stocks sold off throughout the session on Monday, moving from early gains to more than 1.6% losses for both the S&P 500 and Nasdaq by the close. Both indexes have failed to eclipse their September 2 highs thus far, making the mid-September lows (S&P 500: 3209, Nasdaq Composite: 10,520) the important levels to watch.
COVID-19 news. New case growth in the United States accelerated Monday, taking the seven-day average up to 57,000, 15% above the prior week (source: COVID Tracking Project). Hospitalizations rose 36% week over week, based on the seven-day average, as this latest wave unfortunately appears to be picking up steam. In Europe, Ireland and Wales have announced full lockdowns, while daily cases in Germany hit a record high. Moderna expects interim results for its vaccine in November, which may clear the way for emergency use authorization in December, according to a Wall Street Journal report.
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