The US stock markets ended their three-week winning streak as the Dow (-0.9%), NASDAQ (-1.1%), and S&P 500 (-0.5%) exhibited fractional losses. Both taxable and muni tax-free bonds also lost about 0.2%, as 10-year Treasury yields have risen for seven straight days. The rise in the Treasury yields could eventually correspond to higher mortgage interest rates, if those yield increases persist. As far as the stock markets, they appear to be reacting to stalling of the stimulus bill in Congress. There was hope of a near-term stimulus, but there are vast differences of opinion on opposite sides of the aisle in Washington. In light of the election being next week, it is appearing more likely that the stimulus package will be delayed until after the election. More politics ….
We are amid the peak of quarterly corporate earnings season, and the earnings have been fairly robust so far. This implies that companies are recovering from the pandemic better than they anticipated. Or, as I pointed out last week, it may be partly due to previously established low expectations. Regardless, it is encouraging to see corporate earnings on the rise, because they represent the fundamentals of the economy, and subsequently the foundation of the stock market prices. Third quarter GDP is supposed to be announced later this week, so we will receive a better indication of how well the economy has been improving.