S&P 500; US Indexes Fundamental Daily Forecast – Rising Treasury Yields Could Slowdown Upside Momentum

U.S. stock index futures are trading higher early Monday as investors continue to support equities following Friday’s stronger-than-expected U.S. Non-Farm Payrolls report.

Asian Indexes are also trading better in reaction to the U.S. jobs data and as Chinese consumer and producer inflation fell in line with expectations.

On Friday, Wall Street celebrated the news that 222,000 new jobs were created in June versus the 179,000 forecast. The unemployment rate edged slightly higher and wage growth was largely unchanged, compared with the previous month.

Earlier today, June inflation data out of China was in line with expectations. The China consumer price index (CPI) gained 1.5 percent on-year and PPI rose 5.5 percent. Both figures were in line with forecasts.

In Japan, core machinery orders in May dropped 3.6 percent on month, falling short of the 1.7 percent rise forecast.

In other news, the USD/JPY continued to rally, supported by rising U.S. Treasury yields and the weak economic data.

On Friday, the Bank of Japan stepped up its purchases of government bonds in order to cool off their rising yields.

Forecast

There are no major U.S. economic reports on Monday so I expect the markets to continue to gain support from the strength of the U.S. Non-Farm Payrolls report. Traders will continue to keep an eye on rising U.S. Treasury yields because Treasury Bonds and Notes are competing assets with stocks.

Additionally, many major stock market players will be returning from their extended Fourth of July vacations so there is some uncertainty as to whether these investors will be willing to chase the market higher after Friday’s strong gains.

Furthermore, it’s hard to determine whether the buying will be strong enough to sustain the rally ahead of the testimony before Congress by Fed Chair Janet Yellen on Wednesday and Thursday.