ANOTHER JUMP IN TREASURY YIELD PUSHES GLOBAL BOND AND STOCK PRICES LOWER -- EMERGING MARKETS ARE TAKING THE BIGGEST FOREIGN HIT -- BOUNCING DOLLAR PUSHES COMMODITIES LOWER -- ENERGY IS BIGGEST SECTOR LOSER
ANOTHER JUMP IN BOND YIELD PUSHES BOND PRICES LOWER... Treasury yields continue to bounce which is pushing bond prices and stocks sharply lower. Chart 1 show the 10-Year Treasury Yield jumping another six basis points to 1.73%. That's pushing bond prices lower. Chart 2 shows the 20+Year Treasury Bond iShares (TLY) continuing to drop. Foreign bond prices are falling as well. That's also putting a lot of downside pressure on global equities.
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Chart 1
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Chart 2
FOREIGNS STOCK ETFS BREAK 50-DAY LINES... Foreign developed and emerging markets are also taking a hit today. Chart 3 shows the MSCI EAFE iShares (EFA) losing more than 2% and slipping under its 50-day average. Emerging markets are doing even worse. Chart 4 shows Emerging Markets iShares (EEM) losing -2.7% and trading well below its 50-day line. EM markets are especially vulnerable to rising bond yields and falling commodity prices.
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Chart 3
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Chart 4
BOUNCING DOLLAR PUSHES COMMODITIES LOWER... Chart 5 shows the PowerShares Dollar Index ETF (UUP) gaining ground today. That's pushing commodity prices -- and stocks tied to them -- lower. Basic materials and gold stocks are being hit hard. Crude oil is also falling sharply today, making energy shares the day's biggest losers. Chart 6 shows the Bloomberg Commodity Index heading down toward its recent lows. Commodity shares are leading the stock market lower.
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Chart 5
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Chart 6
STOCK INDEXES RETEST FRIDAY'S LOW... Heavy selling has returned after yesterday's rebound. Charts 7 and 8 show the Dow Industrial SPDR (DIA) and the S&P 500 SPDR (SPY) bearing down on Friday's low. Trading volume has been high over the past three days, which isn't a good sign. Both indexes appear headed for a test of initial support along their June highs. I'm still doubtful those initial support lines will hold. While everyone is talking about the Fed and short-term rates, the bigger problem appears to be the global rebound in long-term bond yields. That's being driven largely by foreign forces. The Fed has less control over that.
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Chart 7
