Midday Market Update: Stocks Reverse Course

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Stocks fell by midday Monday, even as one new development pushes the possibility of pre-election fiscal stimulus incrementally closer to a reality.

After having posted gains in the morning, the S&P 500 fell 0.4%. Large cap tech stocks weren’t helping, with the Nasdaq down 0.33%, but other sectors fell as well. Still, the 10-Year Treasury yield rose to 0.76%. Yields rise when prices fall. The divergence in the two markets comes as the 10-Year yield is still below the expected inflation rate, so the bond is vulnerable to selling from some parties.

Speaker Pelosi said over the weekend the White House should have 48 hours to prepare a stimulus deal. Investors want to see stimulus to small businesses and households sooner rather than later, as a deal sooner saves more businesses and people as unemployment is still high and businesses are still cash-strapped and not fully opened.

Still, the Vanguard S&P 500 Value ETF  (VOOV) - Get Vanguard S&P 500 Value ETF Report fell 0.35%. Value stocks are largely correlated with changes in the economy.

Pelosi’s prodding of the White House does not necessarily mean stimulus is bound to be deployed into the economy within the next week and investors, generally confident in the continued economic recovery, are holding back a bit on adding to risk assets, as they wait to price in higher probabilities of the availability of multiple coronavirus vaccines and stimulus. A Biden presidency is expected to yield heavy fiscal spending, but whether the stalling on the near-term round of stimulus will dent the recovery remains to be seen.

In oil, ConocoPhillips  (COP) - Get ConocoPhillips Report is buying Concho Resources (two oil drillers) for $9.7 billion in all stock. This comes as oil prices have been down all year amidst pandemic-related uncertainty. Oil drillers are looking to consolidate and bring prices up. The $36 billion by market cap ConocoPhillips rose 0.2% a to $33.85 share

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