SP500 Pulls Back Amid Rising Treasury Yields
SP500 is losing ground as traders focus on rising Treasury yields and react to the strong rebound in the oil markets.
Treasury yields rallied as bond traders reacted to the better-than-expected PMI reports. Manufacturing PMi increased from 53.9 in August to 57 in September, compared to analyst forecast of 53.6. Services PMI grew from 56.5 to 58.7, exceeding the analyst estimate of 56. Numbers above 50 show expansion. The reports highlighted the strength of the U.S. economy and served as a negative catalyst for markets as traders have started to prepare for a potential rate hike.
According to FedWatch Tool, the probability of a rate hike at the next meeting in October is 68.6%. Markets expect that Fed will also raise the federal funds rate at the meeting in December.
Worries about hawkish Fed pushed the yield of 2-year Treasuries towards the 4.90% level. The yield of 10-year Treasuries climbed above the 5.11% level, while the yield of 30-year Treasuries settled above 5.40%. The U.S. Treasury announced that it would raise buybacks to $6 billion, but this decision did not provide any support to bonds. From a big picture point of view, the bond market remains in a state of panic, which is bearish for SP500.
Oil prices rallied as traders focused on global diesel shortage. WTI oil climbed above the $92.00 level, while Brent oil moved above the $103.00 level. Rising oil prices put additional pressure on SP500 in today’s trading session.
Not surprisingly, energy stocks were among the biggest gainers in the SP500 index today. Basic materials stocks found themselves under strong pressure as traders reacted to the sell-off in precious metals markets. Utilities stocks pulled back amid rising Treasury yields.
Currently, SP500 is trying to settle below the support level at 7720 – 7730. In case this attempt is successful, SP500 will head towards the 50 MA at 7671. A move below the 50 MA will open the way to the test of the next support at 7615 – 7625. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
NASDAQ Is Losing Ground Amid Profit-Taking
NASDAQ moved lower as traders rushed to take profits near historic highs amid rising Treasury yields. It remains to be seen whether NASDAQ will gain additional downside momentum as traders may use the pullback as an opportunity to buy AI-related stocks.
If NASDAQ settles below the 30,500 level, it will head towards the nearest support at 30,200 – 30,250. A successful test of this level will push NASDAQ towards the next support at 29,850 – 29,900.
Dow Jones Price Forecast
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See all Dow Jones forecastsDow Jones Tests Support At 51,600 – 51,700
Dow Jones is losing ground amid broad pullback in the equity markets. McDonald’s, which is down by -5.1%, is the worst performer in the Dow Jones index today.
From the technical point of view, Dow Jones attempts to settle below the support level at 51,600 – 51,700. If Dow Jones manages to settle below the 51,600 level, it will head towards the next support at 51,100 – 51,200. On the upside, a move above the 51,700 level will push Dow Jones towards the 50 MA at 51,994.
For a look at all of today’s economic events, check out our economic calendar.
