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Midday Market Update: Stocks Maintain Gains on Economic Momentum

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Stocks continued to rise by midday Thursday, as signs of the speedy economic recovery keep flowing in, even as election-related uncertainty has been a theme to start the fall season.

The S&P 500 rose 0.5%, with the tech-heavy Nasdaq up 0.95%. The 10-Year Treasury yield was flat at 0.68% after having risen to 0.71% in the morning. Yields rise when prices fall.

FAANG stocks were up more than 1% as their powerful earnings drivers continue to outweigh investors’ recent interest in value stocks more tethered to economic growth.

Most large cap cyclical stocks rose, with large cap banking up marginally, industrials up a bit more and consumer discretionary up just under 1%.

Positively, jobless claims for the past week came in at 837,000, far lower than last week’s 873,000, another indication of late that the labor market is strengthening and that the economic and corporate earnings recovery is maintaining its speed.

Aiding the positive economic outlook was U.S. Treasury Secretary Steve Mnuchin saying the current fiscal stimulus bill is moving along. It is $2.2 trillion, with $1,200 stimulus checks to households, $600 in unemployment benefits for the many that are still jobless and $120 billion in aid to the restaurant industry. Investors are hoping the bill is not too late, as some small businesses and households may be headed for insolvency.

One convincing indication in the equity market that investors are pricing in a strong likelihood of the continuation of the V-shaped recovery is that debt-laden, beaten down cyclical stocks are outperforming, as economic momentum brings them further away from financial duress. American Airlines  (AAL)  is 60% below its all-time high and up 1.6% on the day.

Election risks, not just around policy outcomes, but also around the potential for flaws in ballot-counting, has created, and is expected to create volatility for the near-term. 

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