Wall Street stocks mixed as higher bond yields weigh on stocks
|- Investors are pricing in four rate hikes in 2018 as 10-year benchmark yields rise to 4 year high.
- Weak smartphone demand weighed on the technology sector.
- On the earnings front, Alphabet (Google) beat analysts expectations.
The S&P 500 Index closed virtually unchanged at 2,670. The Dow Jones Industrial Average closed at 24,448 down 14 points less than 0.10% while the Nasdaq Composite Index closed the session down at 7,128 or 0.3% on Monday. Weak smartphone demand weighed on the technology sector.
The main theme is the rise in US bond yields, especially the 10-year benchmark which has come very close to the 3.00% mark in Monday’s trading. Investors are starting to price in four rate hikes instead of three suggested by policymakers. Also behind the rise in yields is the favorable fiscal policy in the US according to analysts at Danske Bank.
Increased interest rates can be seen as detrimental to companies as the cost of borrowing money gets higher. Additionally, if bond yields get too high it can stir investors away from riskier assets like stocks.
Meanwhile, on the earning front Alphabet (Google parent company) beat analysts expectations with $9.93 earnings per share vs $9.28 expected. Its revenue is $31.15 billion versus $30.29 billion expected while its operating income for 2018 came in at $7 billion versus $6.6 billion in 2017. Google's ads business alone brought $26.642 billion in revenue for the first quarter.
S&P500 daily chart
Immediate support is seen at 2,647.25 swing low and 2625 demand level. Resistance is seen at 2,718.75 and 2,800 swing high.
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