SPDR S&P 500 ETF Trust (SPY) News and Forecast: Rising yields continue putting pressure on equities

A day of significant movement for the bond market eventually fed through to the stock market as investors took flight from yet more hawkish commentary from central bankers. All sectors closed in the red for the S&P 500 with energy (XLE) taking the worst hit, losing 3%, while communications (XLC) also took a near 3% loss. The best performing sectors were Consumer Staples (XLP) and Real Estate (XLRE). Unsurprisingly, the VIX moved up a few points to 23, but it is bond market volatility, the MOVE index, that is creating the bigger gains and spooking global markets. 

SPY Stock News

The rise in yields is continuing on Friday after what we would see as relatively unsurprising comments from Fed chair Powell. 50 basis points looks like a certainty for the May meeting, and in fact the fed funds futures contract has this at a near 100% certainty. However, further out in the calendar three consecutive 50 basis point rises now look odds on also. This is what spooked high debt companies and high growth names, many of whom litter the Nasdaq. Tesla (TSLA) did notably close 3% higher on Thursday following its strong earnings, but this in fact was a 3% fall from where the stock opened the regular session. 

SPY Stock Forecast

Thursday saw a large bearish engulfing candle, which demonstrates the relative calm from previous days. A move of 1.5% is not huge by recent standards but was still enough to overshadow most of the week's gains. The SPY also stalled at the 200-day moving average and so finds itself lacking short-term direction. More chop is likely in the short term as earnings season plays out. Big tech could yet save us. For now the medium term picture is bearish with a series of lower highs. Key resistance remains at $458 with $428 the immediate support.  $415 is a powerful double bottom and a break here will likely see the SPY trade below $400.

SPY chart, daily