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Market Update

Stock Sellers Come Up for Air but the Sting of Higher Yields Still in Focus

Print
June 10, 2015

A mixed finish for major stock averages on Tuesday and choppy early action is likely considered a minor victory for stock bulls. As sellers pause, the broader stock market snapped a multi-session slump. Even with the drop, the S&P 500 (SPX) held downside support at 2080 (figure 1) and continues, so far, to knock around in the 2080-2130 range in place since early May. Outside influences continue to help drive stock-trading sentiment, including rising bond yields, dollar fluctuations, and oil’s move to back above $60 a barrel.

SPX-Holds-Support

FIGURE 1: SUPPORT HELD.

The S&P 500 (SPX) held closing level support at 2080 Tuesday. This remains an important line for a market that ranged between 2080-2130 since early May. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Yield to the Bond Market. The bond market’s selloff and subsequent move higher for yields continues to factor in stock sentiment. That’s because all markets are keeping track of the rising interest-rate forecasts reflected in the repositioning among bond traders. The selling sent the yield on the benchmark 10-year Treasury note to the highest level in eight months, nearing 2.42%. The yield on the 10-year German government bond rose to the highest since September and the yield on the 10-year U.K. government bond increased to the highest since November.

Yapping About the Yen. The dollar’s near-term weakness could prove a positive stock catalyst. A weaker buck could play well for export-heavy U.S. companies. The greenback fell against the yen in particular after a Bank of Japan official offered his expectation that the yen is not likely to weaken significantly from current levels.

OPEC Holds the Line. The Organization of the Petroleum Exporting Countries said Wednesday it sees no further rise in demand for its crude this year, but it expects the current oversupply in the market to ease over the coming quarters. In its closely watched monthly oil market report, OPEC kept its forecast for oil demand growth in 2015 unchanged at 1.18 million barrels a day, and said expectations of demand for its own oil this year remains at 29.3 million barrels a day, or 300,000 higher than 2014. The oil producer group said risks in U.S. oil demand remain skewed to the upside as lower price environment plays a role in pushing up demand for transportation fuels. In early futures trading, crude oil edged further above $60 a barrel.

Good trading,
JJ
@TDAJJKinahan

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