Daily Market Color November 12, 2020Equities Reach Two-Month High After Vaccine Developments Equities rise to two-month highs as vaccine developments continue to steer markets On Wednesday, equity markets continued to look past the second wave of COVID-19 that is spreading rapidly through US hotspots, with officials hinting at further lockdowns in the future. New York City is reporting an average positivity rate of 2.52%, nearing its 2.61% all-time high. Mayor de Blasio warned that schools may be forced to shut down once again but added that the city has one “last chance” before further action is taken. Despite the ominous news, the S&P 500 closed 0.8% higher to hit a 10-week high while the DJIA fell 0.1%. Treasury yields and swap rates are trading 1-5 bps lower across the curve this morning after closing higher on Tuesday – the 10 year UST yield retreating to 0.93% after nearly crossing the psychological 1% level. CPI levels were unchanged in October while jobless claims fell to 709,000 As published by the Labor Department this morning, both the headline and core Consumer Price Indices were unchanged during October after rising in the prior four months – dragging the Y/Y core CPI level down to 1.6% from 1.7%. The report detailed that rising prices of dining out and groceries were largely offset by declines in the vehicle and household furnishing sectors. Initial jobless claims, also released this morning, fell to a pandemic low of 709,000, almost 50,000 lower than from the week prior. The figure was far below economist expectations and pulled the four-week moving average down to 755,250. Fed’s Rosengren calls for added fiscal stimulus During his speech on Tuesday, Boston Fed President Eric Rosengren stressed the urgency of another stimulus package from Congress. He added, “With a second wave of infections underway, my sense is that more fiscal and monetary accommodation is appropriate.” According to Rosengren, certain sectors of the economy have been hit harder throughout the pandemic than others, making those employees more susceptible to losing their jobs. If those sectors are not given adequate aid, they could slow the overall pace of the US economic recovery. Until a package is passed, the Fed will remain focused on liquidity, potentially increasing their asset-purchases and expanding their balance sheet if necessary.
