RISING BOND YIELDS CONTINUE TO BOOST BANKS AND INSURERS -- BANK ETF HITS NEW HIGH -- BANK LEADERS INCLUDE KEYCORP, HUNTINGTON BANKCORP, AND PNC -- INSURANCE LEADERS INCLUDE CHUBB AND HARTFORD FINANCIAL -- RISING RATES HURT REITS
BOND YIELDS CONTINUE TO CLIMB... Chart 1 shows the 10-Year Treasury Yield climbing again today after finding support along its 200-day moving average. Rising yields are giving the usual lift to financial shares, banks and insurers in particular. Chart 2 shows the S&P Bank SPDR (KBE) trading at the highest level since the start of the year. The KBE/S&P 500 relative strength ratio (top of chart) is in an uptrend as well. The day's two strongest financial groups are banks and insurers.
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Chart 1
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Chart 2
KEYCORP, HUNTINGTON BANCSHARES, AND PNC TURN UP ... Several regional banks are among the strongest stocks in the banking group. Chart 3 shows Keycorp (KEY) surging to the highest level in a year. Chart 4 shows Huntington Bancshares (HBAN) rising above its spring high to achieve a bullish breakout. Other recent bank breakouts include Regions Financial (RF), Fifth Third Bancorp (FITB), Suntrust Banks (STI), and PNC. Chart 5 shows PNC trading at the highest level since the start of the year and in a clear uptrend. A recent BARRONS article suggested that smaller regional banks were doing better than large investment banks because the former are more focused on the U.S. economy and have less foreign exposure. That makes sense.
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Chart 3
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Chart 4
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Chart 5
INSURERS CHUBB AND HARTFORD ARE ALSO BOUNCING... Two of the biggest percentage gainers in the financial sector are insurers. Chart 6 shows Chubb (CB) jumping 3% to cross back above its 50-day average. The stock recently found support at its 200-day average. Chart 7 shows Hartford Financial Services (HIG) bouncing off its 200-day average.
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Chart 6
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Chart 7
RISING RATES HURT REITS... Rate sensitive sectors like Real Estate Instrument Trusts (REITS) are usually hurt by rising rates. That may explain why they're among today's weakest groups. Chart 8 shows the Dow Jones REIT SPDR (RWR) falling further below its 200-day average in today's trading. The green area shows that the recent drop in REITs (both on an absolute and relative basis) has concided with rising bond yields. REITs were recently removed from the financial sector to form their own sector. That's also given a boost to the Financial SPDR (XLF).
