US: S&P 500 flat, 10-year yields continued dramatic rise - BBH

US 10-year yields have continued their dramatic rise and were threatening to go below 2.10% in mid-June and now three weeks later are testing the 2.40% area, which has capped yields since mid-March, notes Marc Chandler, Global Head of Currency Strategy at BBH.  

Key Quotes

“The technical indicators are getting stretched after the three-week sell-off, and the 50% retracement objective of the rally since mid-March was nearly met (124-21).  However, the close was poor, and the strength of US jobs growth, including the uptick in the average weekly hours worked, should set the tone for the upcoming data.  The 61.8% retracement is found near 124-00, but the May low (124-12) may offer initial support.”

“The S&P 500 closed virtually flat on the week.  It has spent the better part of the past five weeks in a 2400-2450 range.  It has coped with the rise in interest rates better than many would have expected, not just the recent backing up of rates, but also the "three steps and a stumble" folklore.   This broadly sideways movement has alleviated the overbought condition as recorded by the technical indicators, and the now the MACDs and Slow Stochastics are near to turning higher.  The second quarter earning seasons formally kicks off with Alcoa on July 19.  The Russell Value Index slipped almost 0.2% last week, its second loss since the mid-May.  The Russell Growth Index rose by nearly as much and is now essentially flat over the past three weeks.”