Daily Market Color

Rates and Equities Close Lower in Risk-Off Move

Fueled by rising virus cases, Treasury yields and equities move lower
In a major risk-off move, both equities and rates have moved lower as stimulus stalemate continues.  Despite House Speaker Nancy Pelosi’s optimism, Democrats and the White House are still unable to compromise on the size and scope of the package.  The likelihood of a bill being passed before the November 3rd election is decreasing rapidly, with White House economic advisor Larry Kudlow commenting that the differences between bipartisan parties “have narrowed,” but “the more it narrows, the more conditions come up on the other side.” 

Major indexes closed lower on the day yesterday — the S&P 500 and DJIA dropping 1.9% and 2.3%.  Treasury yields and swap rates reversed some of last week’s gains — the 10-year closing 4 bps lower at 0.80%. Both rates and risk assets are lower once again today, swap rates starting the day down 2-3 basis points across the curve.
Virus update
Virus cases in the US hit a new average seven-day all-time high of 68,767, with new daily records of 83,000 set on Friday and Saturday.  Dr. Anthony Fauci attempted to calm rising concerns on Monday, adding “Luckily, despite the fact that we are dealing with a very, very challenging period right now, even more so as we enter the cooler months of the fall and the colder months of the winter, that vaccines are proceeding at a very good pace.” 

The race for a vaccine seems to be nearing an end as AstraZeneca and Johnson & Johnson recently restarted their phase 2 testing.  Yesterday, AstraZeneca reported that their experimental vaccine was producing promising immune responses in older adults.  A spokesperson for the pharmaceutical company described the results as “encouraging,” but added that the safety and the long-term immune response of the drug has not yet been confirmed.  Global virus cases are nearing 44 million with fatalities topping 1.16 million.
New home sales fall in September
After rising for the past four months, new homes sales fell 3.5% to 959,000 in September, missing economist expectations.  The decline was driven by home sales falling nearly 29% in the Northeast, with other regions experiencing much smaller losses.  Despite the drop, home sales are up 32% year to date.  Yesterday’s report contradicts last week’s existing home sales figure, which showed a higher-than-expected 9.4% rise.  

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