TEN-YEAR TREASURY YIELD NEAR 1% MARK... STOCK INDEXES ARE HITTING NEW RECORDS -- FINANCIAL SPDR HITS NEW RECOVERY HIGH

TEN-YEAR TREASURY YIELD NEARS 1%... Treasury bond yields continue to climb and are hitting new recovery highs.   Chart 1 shows the 10-Year Treasury Yield trading rising 5 basis points today to .96%.  It also touched the highest level since March.   That's obviously bad for Treasury bond prices which are declining as bond yields rise.   But it may be reflecting a more optimistic mood in the stock market, and economically-sensitive stock groups in particular which are leading the market higher.   That includes energy, materials, and industrials which are among the market's strongest sectors.   Small cap leadership is another positive sign for the economy and stock market.    Financial stocks like banks are also benefiting from a steeper yield curve resulting from higher bond yields.   Bond yields usually rise on expectations for a stronger economy with higher inflation.  Positive vaccine news may be boosting yields as well as recent hints at some fiscal stimulus.    It also suggests that some money leaving bonds is finding its way into stocks.

STOCK INDEXES HIT NEW RECORDS... The next three charts show the major U.S. stock indexes hitting new record highs.   So are small cap stocks as represented by the Russell 2000.   And that's in the face of various sentiment measures at the highest level in years.   The percent of S&P 500 stocks above their 200-day moving averages has risen above 90% which is the highest level in seven-years.    That's good in the sense that it shows broad market participation.   But is also reflects market sentiment which is very stretched on the upside.   The three charts shown below show RSI lines that haven't yet reached overbought territory over 70.   But they're getting close.

FINANCIALS CONTINUE TO LEAD...Energy and financials continue to show market leadership.   Chart 5 shows the Financial SPDR (XLF) hitting the highest level since the first quarter.   It's being led higher by bank stocks which are one of the main beneficiaries of rising bond yields.   Energy stocks also continue to show market leadership on the back of higher oil prices.   That may also be one of side effects of a weaker dollar which is pushing most commodity prices higher.