The S&P 500 Index reached new all-time highs this week and returned 1.39% as markets digested the early 3Q21 earnings season. The large cap index rebounded from a negative September to finish October up over 6%: the strongest monthly return since November of 2020. Earnings season is in full swing with 279 of the companies in the S&P 500 having reported. 82% have beaten earnings expectations and 67% have beaten revenue expectations.
Yield curve flattening picked up steam last week as central banks prepare to taper easy-money policies implemented at the onset of the pandemic. Longer-term US Treasury rates fell on lower growth expectations while shorter-term rates held relatively flat in expectation of the Fed beginning to raise rates next year. The gap between the 5-year US Treasury yield and 30-year yield narrowed to its smallest level since March 2020. The U.S. economy grew at an annual rate of 2.0% in the third quarter, which was slower than expected, as supply chain issues weighed on growth. It was the slowest pace since the recovery began in the third quarter of 2020. Consumer spending growth also slowed in September, growing 0.6% compared to 1% in August. The Fed meets on Tuesday and Wednesday this week and is widely expected to keep rates unchanged, before raising rates in 2022.