RISING BOND YIELDS BOOST BANKS -- REGIONAL SPDR CLEARS 200-DAY AVERAGE -- REGIONAL BANK LEADERS INCLUDE COMERICA, REGIONS FINANCIAL, AND FITB
BOND YIELDS ARE CLIMBING AGAIN... After a pullback last week, bond yields are climbing again. Chart 1 shows the 30-Year Treasury ¥ield climbing 5 basis points today to 1.60%. And it's back above its 200-day moving average. The 10-Year Treasury yield is up as well, and is nearing a new four-month high. Rising bond yields are normally a sign of optimism on the part of fixed income investors. Within fixed income, longer-maturity Treasuries are being sold while high-yield bonds which are more closely tied to stocks are up today. Rising bond yields are helping boost financial stocks, and regional banks in particular.
REGIONAL BANK SPDR CLEARS 200-DAY AVERAGE... Financials are one of the day's strongest sectors. Chart 2 shows the Financial SPDR (XLF) bouncing off its 50- and 200-day moving averages. Banks are helping lead it higher. Especially regional banks. Chart 3 shows the S&P Regional Banking SPDR (KRE) trading above its 200-day line for the first time since February. A number of regional banks are leading the XLF higher today.
REGIONAL BANK LEADERS...The two biggest percentage gainers in the XLF are regional banks. Chart 4 shows Comerica (CMA) surging to the highest level in four months after clearing its 200-day average a couple of weeks ago. Chart 5 shows Regions Financial (RF) doing the same. Fifth Third Bancorp (FITB) is also one of the day's top financial gainers. Chart 6 shows that regional bank leader already challenging its June high near 24. A decisive close above that barrier would put the regional bank at the highest level since February.
GOLDMAN SACHS AND MORGAN STANLEY ALSO LEAD... Some of the larger bank stocks are starting to act better as well. Chart 7 shows Goldman Sachs (GS) nearing a test of overhead resistance near 215. A close above that barrier would put the stock at the highest level in three months. GS is trading above both moving average lines. Chart 8 shows Morgan Stanley (MS) trading above its 50-day moving average and nearing the highest level since early September. It bounced off its 200-day line a month ago. It too qualifies as a potential leader in the bank group.
STOCKS TRADE HIGHER... Stocks are trading higher today and regaining some of yesterday's losses. Chart 9 shows the S&P 500 bouncing off potential short-term support near 3425 (see trendline). The SPX also remains above its 20- and 50-day moving averages. All eleven sectors are in the black with the biggest gainers in consumer cyclicals, financials, industrials, communications, and technology. A lot appears to be riding on hopes for some type of stimulus package in Washington. Hopes for some stimulus may be also be boosting bond yields.
