LONG-TERM INTEREST RATES HIT HIGH FOR THE YEAR

SURGE OVER 4%... The yield on the 10-year T-note jumped to 4.17% today, which was the highest close in since last December. We offered the view last week that long-term rates had probably hit bottom. Today's surge in long-term rates strengthens that view. We also suggested last week that sharply higher rates could threaten a fragile economic recovery, which wouldn't be good for stocks. We had hoped that the selling of bonds would siphon some money back into the stock market. Over the short run, it looks like the surge in rates is causing profit-taking in stocks.

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S&P 500 THREATENING 50-DAY LINE... Short-term indicators remain negative for the S&P 500. And, as the daily price chart shows, the SPX is threatening its 50-day moving average which currently sits at 975. The early July intra-day low at 962 isn't far behind.

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SELLING DRUGS... Earlier today, we showed the Drug Index trading under its 50-day moving average. Drugs were sold today on some disappointing news from Merck. Pfizer was one of the most actively traded stocks today. Unfortunately, most of the trading was selling.

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TECH SELLING... Technology was the day's weakest sector. Two of the biggest tech casualties are shown below. Both stocks tumbled on massive volume. Telecom stocks fell heavily again.

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3M GAINS ON VOLUME... There were some winners today. The most notable was 3M, which was the Dow's biggest gainer. The stock surged over 6 points on very heavy volume. 3M is on the verge of hitting a new all-time high.

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NEWMONT CONSOLIDATING IN UPTREND... A weaker dollar boosted gold prices today. That, combined with a weak stock market, gave a 3.5% boost to gold stocks. Newmont Mining bounced off its 50-day moving average on rising volume. The gold leader recently broke out to the highest level in more than five years. Its weekly chart shows that NEM appears to be consolidating within an emerging uptrend.

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