S&P 500 (SPY) Retreats As Treasury Yields Test New Highs

Key Insights

• Stocks remain under pressure as Treasury yields keep moving higher. 
• Traders stay focused on the hawkish Fed. 
• A move below 3750 will push S&P 500 towards the support level at 3725.

Consumer Cyclical Stocks Decline Amid Recession Fears

S&P 500 remains under pressure as traders stay focused on hawkish Fed. Today’s Initial Jobless Claims report, which indicated that 213,000 Americans filed for unemployment benefits in a week, served as an additional negative catalyst for stocks. The job market remains tight, which pushes Fed to raise rates aggressively as it wants to cool demand.

Consumer cyclical stocks, which were among yesterday’s losers, are under strong pressure today. Caesars Entertainment, Expedia, Etsy are down by 5-8% in today’s trading session. The market prepares for a recession when consumers cut “unnecessary” purchases.

Treasury yields keep moving higher, which is bearish for tech stocks. Currently, the yield of 10-year Treasuries is trying to settle above the 3.70% level. Such yields were last seen back in 2011.

AMD and NVIDIA are among the biggest losers in the tech segment. Traders fear that weakening PC demand will hurt their results.

Energy stocks are gaining some ground today. Leaders include refining stocks like Valero Energy, Phillips 66, and Marathon Petroleum.

From a big picture point of view, the market remains bearish. Rising Treasury yields indicate that bond traders continue to prepare for aggressive rate hikes from the Fed. In case Treasury yields move to new highs, stocks may find themselves under more pressure.

S&P 500 Tests Support At 3750

S&P 500 is currently trying to settle below the support level at 3750. In case this attempt is successful, it will head towards the next support, which is located at 3725. A move below this level will open the way to the test of the support at 3700. If S&P 500 declines below 3700, it will head towards the support at 3660.

On the upside, the nearest resistance level for S&P 500 is located at 3780. If S&P 500 gets above this level, it will head towards the next resistance at 3800. A successful test of this level will push S&P 500 towards the resistance at 3825.

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