S&P 500 (SPY) Declines As Treasury Yields Rise

Key Insights

• S&P 500 found itself under pressure as Treasury yields continued to rebound. 
• Higher yields pushed REITs to new lows. 
• Energy stocks gained strong upside momentum as WTI oil made an attempt to settle above the resistance at the 50 EMA. 

REITs Remain Under Strong Pressure

S&P 500 is moving lower after an unsuccessful attempt to settle above the 20 EMA near the 3800 level.

Today, traders focused on the Initial Jobless Claims report, which showed that 219,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 203,000.

Tomorrow, traders will take a look at the Non Farm Payrolls report, which is expected to show that the economy added 250,000 jobs in September. This report will likely have a material impact on S&P 500 dynamics.

Meanwhile, Treasury yields moved higher, which was bearish for stocks. The yield of 10-year Treasuries is currently trying to settle above the 3.80% level. In case this attempt is successful, it will move towards the recent highs at 4.00%, which will put more pressure on the stock market.

Energy stocks like Marathon Oil, Occidental Petroleum, and Halliburton continued to move higher today as WTI oil tested the important resistance level at the 50 EMA at $88.40.

Meanwhile, REITs remained under strong pressure. Traders look at higher Treasury yields and sell everything that is related to the REIT segment. Digital Realty Trust, Crown Castle, and American Tower Corporation are testing new lows.

While S&P 500 is down by about 0.5%, today’s pullback is broad as energy stocks are the only group in the positive territory. This is not surprising as Treasury yields have quickly rebounded after the recent pullback, indicating that traders remain worried about aggressive rate hikes from the Fed.

S&P 500 Failed To Settle Above The 20 EMA

From a technical point of view, S&P 500 needs to settle above the 20 EMA to have a chance to continue its rebound. S&P 500 has already made several attempts to settle above the 20 EMA near the 3800 level, but these attempts yielded no results.

If S&P 500 stays below the 20 EMA, it may soon find itself under significant pressure. In this scenario, S&P 500 will likely test the 3700 level.

For a look at all of today’s economic events, check out our economic calendar.