BOUNCING BOND YIELDS BOOST BANKS AND FINANCIALS -- AND CONTRIBUTE TO PROFIT-TAKING IN GOLD

GLOBAL YIELDS REBOUND... Bond yields are rebounding today.  That may be partially due to an uptick in producer price inflation.   Or the fact that global stocks are also rebounding which is driving some money out of bonds and into stocks.   Global yields are rebounding along with stocks.   Chart 1 shows the 10-Year Treasury Yield jumping 7 basis points today to .64%.  That's the biggest jump in two months.   The jump in bond yields is contributing to profit-taking in precious metals which benefit from low bond yields.   One market group that usually benefits from rising yields are financials, and banks in particular.  Right on cue, that sector is having a strong day.

BANKS LEAD FINANCIALS HIGHER... Bank stocks are one of the day's strongest groups.Chart 2 shows the KBW Bank Index ($BKX) jumping more than 4% this morning to reach the highest level in nearly two months.  Bank stocks are especially sensitive to the direction of bond yields and the shape of the yield curve.  That's because they pay deposits with short-term yields and lend with long-term yields.  Higher bond yields allow banks to charge more for their loans.   Rising bond yields also usually benefit the financial sector as a whole.  Chart 3 shows the Financial Sector SPDR (XLF) gapping higher this morning and challenging its 200-day moving average (red line).  Insurance stocks, which also benefit from higher bond yields, are also leading the XLF higher today.   Financials are the day's top sector gainer.  Today's buying of financials may also be part of the recent rotation into cyclical value stocks that have been lagging behind the rest of the market.    Gold stocks, however, are under pressure along with the precious metal.

GOLD PRICES PLUNGE... Chart 4 shows the VanEck Vectors Gold Miners ETF (GDX) dropping -6% today. Its daily MACD lines have also turned negative.   The spot price of gold is falling -$80 (-4%) to $1945 putting it back below the psychological $2000 level.   Chart 5 shows the Gold SPDR (GLD) gapping sharply lower from a very overbought condition with its 14-day RSI line having reached an unusually high reading near 90.   Rising bond yields are usually negative for precious metals which pay no interest.    Silver and its miners are also being sold heavily today.