RISING RATES HURT STOCKS -- HOMEBUILDERS AND HEALTHCARE FALL -- FOOD RETAILERS RISE
RATES ARE JUMPING AGAIN... Just a day after the Fed talked about keeping interest rates low, long-term yields rose sharply. A stronger-than-expected retail report caused T-bond and note prices to fall over a point. The yield on the 10-year T-note jumped to a new yearly closing high of 4.56%. As has been the case since June, rising rates had a negative impact on stocks. Although today's stock losses weren't big, they took place on rising volume. As is usually the case when rates are rising, homebuilders were one of the hardest hit market sectors.
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CENTEX FALLS ON VOLUME... Centex was the biggest percentage loser among the homebuilders. The stock has been trading under its 50-day average for four weeks. Today's selloff came on rising volume which isn't a good sign. Homebuilders are one of the most vulnerable market groups in a climate of rising long-term interest rates. Financial stocks in general were also one of the day's weakest sectors.
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HEALTHCARE LOSERS... The next three charts show why the healthcare group was weak today. Pfizer broke its 200-day average on rising volume. St. Jude Medical backed off from its 50-day line on rising volume. Medtronics tumbled on massive volume. There was some good news however. Investors were stocking up on food retailers.
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BUYING FOOD RETAILERS... Investors were stocking up on food today. All three food retailers rose today on impressive volume. Albertsons jumped through its 50-day average. Safeway rose to a new six-month high. Kroger is close to an eleven-month high.
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FALLING DOLLAR BOOSTS GOLD... The dollar followed the stock market lower today. That gave gold bullion a boost of $3.70 to over $363. Gold stocks were up as a result. The AMEX Gold Bugs Index gained 1.70% and is close to another multi-year high.
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DOW NEAR TOP OF TRADING RANGE... The Dow has been the strongest of the major stock indexes. However, its daily chart shows the Dow having reached the top of its eight-week trading range. [The Dow's relative strength is due to its heavy weighting in cyclical stocks which have been strong]. The Dow lost 38 points today. Little has changed in the markets short-term direction. The market remains locked in a short-term trading range. In case you don't think that rising rates (and falling bond prices) are having a negative impact on stocks, compare the action of charts 11 and 12. They show that the mid-June peak in stocks coincides exactly with the peak in bond prices. It had been throught that falling bond prices would push money into stocks. So far, we haven't seen much of that happening.
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