DAILY INSIGHTS

Last week’s slide continues. US stocks opened about 2% lower this morning amid rising concerns of a second wave of COVID-19. The pullback in the S&P 500 Index since June 8 has only reached 6% and may have further to go. Europe held up slightly better on healthcare sector resilience, while Asian markets fell broadly, with Japan losing 3.5%.

Stocks still appear ahead of fundamentals. We continue to believe stock prices reflect an overly optimistic view of the US economy. As we wrote here last week, our belief is that the next leg of recovery will be gradual as efforts to contain COVID-19 continue and the economic damage takes time to heal. The S&P 500 also was up over 44% from the March 23 low as of June 8 and significantly overbought, suggesting a pullback was overdue.

The week ahead. This week’s economic calendar features retail sales for May, which are expected to show an 8% increase from April’s historic 16.4% drop (source: Bloomberg). Federal Reserve Chairman Jay Powell will testify before Congress on Tuesday and Wednesday. The Bank of Japan policy announcement is slated for Tuesday, followed by the Bank of England on Thursday—both are expected to add stimulus.

Green shoots. Real-time data continues to provide valuable insight into the current state of the US economy as traditional economic data is too slow to pick up changes that are occurring. Today on the LPL Research blog we revisit some of these real-time data points that we are monitoring that indicate the US economy is on the road to recovery.

COVID-19 news. Confirmed US cases rose 0.94% yesterday, up from 0.92% on the same day last week, as testing rose about 9% and the percentage of positive tests remained steady slightly below 5%. Attention remains on about 20 states seeing increases since the Memorial Day holiday, particularly in the Sun Belt and Texas. An outbreak in Beijing tied to a food market led to China’s biggest daily increase in cases since mid-April (57) (Source: COVID-19 Tracking Project).

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All index and market data are from FactSet and MarketWatch.

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