US equities were notably higher in Monday trading. The improvement in President Trump’s health along with the prospect for fiscal stimulus (both now and later with the odds of a Democratic sweep increasing in the betting markets) led to the rally in risk assets. Treasuries were weaker with the curve steepening. The dollar outperformed the yen but lagged on the euro cross. Gold finished up 0.7% following a 2%+ gain last week. WTI crude settled up 5.9% after losing ~8% last week.
- Outperformers: Energy +2.90%, Tech +2.27%, Healthcare +2.09%, Materials +1.92%
- Underperformers: REITs +0.59%, Consumer Spls. +0.77%, Utilities +1.26%, Financials +1.59%, Consumer Disc. +1.60%, Communication Svcs. +1.63%, Industrials +1.63%
S&P futures are down 0.2% after Asian markets were higher overnight with Taiwan, Hong Kong and Japan the best performers. European markets are mostly lower. Treasuries unchanged to slightly stronger after yields saw upward pressure yesterday, hitting their highest levels since June. The dollar is lagging the yen while trading stronger vs the euro. Gold is off 0.1%. WTI Crude is up 1.2%.
Long-Bonds Hit Hard
The long end of the treasury curve has come under pressure of late leading to the curve steepening. This is largely in line with the view that fiscal stimulus is a matter when and how much, not if, and is also inflationary. The prospects for the fiscal side of the house getting in gear with the Fed are increasing as Vice President Biden increases his lead over President Trump in the polls and more importantly in the betting markets.
A Closer Look at Sector Rotation
The Communication Services Sector (XLC) Relative to the S&P 500
The S&P 500 Communication Services sector relative to the S&P 500 continues to trade above the rising 200-day moving average but is falling out of the consolidation zone after a false break to new highs. The RSI is in bullish ranges for now but the low end of the zone is being tested. Trend: Neutral